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Earthquake Insurance
from Pepper, Johnstone & Company
Two Important Things About Earthquake Insurance:
- Earthquake insurance is a separate policy or endorsement that covers damage to your home and belongings caused by earthquakes, since standard home, condo, and renters insurance policies usually do not.
- Even if you live in an area where earthquakes are not common, you may still need earthquake insurance.
Homeowners, condo owners, and renters often assume earthquake damage is covered until they review their policy closely. Earthquakes have occurred in 39 states since 1900, and about 90% of Americans live in areas considered seismically active, which makes the coverage worth considering well beyond the highest-risk regions.
This guide explains what earthquake insurance is, where and why it makes sense, what it covers, how to prepare before an earthquake, what to do after one, and what affects premiums and claims. For many of our clients in Alabama, earthquake insurance can be inexpensive. Contact us to find out what the costs would be for your home.
Earthquake Insurance Options
Most home, condo, and renters insurance policies, including standard homeowners insurance, do not include earthquake coverage for earthquake-related damage, but you can purchase that protection as an endorsement or a separate policy. You may be able to choose to purchase earthquake insurance from the same company that provides your home insurance, from a specialized earthquake insurance provider, or from an independent organization such as the California Earthquake Authority (CEA), where in California a CEA earthquake policy, also called a CEA policy, is obtained alongside a residential property insurance policy.
Do I Need Earthquake Insurance?
In all likelihood, almost the entire US would be better protected by purchasing earthquake insurance. Consider the facts:
- In the West - According to the U.S. Geological Survey, there is a 70% probability that one or more damaging earthquakes of magnitude 6.7 or larger will strike the San Francisco Bay Area during the next 30 years.
- In the East - The Earthquake Education Center at Charleston Southern University claims there is a 40% to 60% chance of a major earthquake somewhere in the eastern United States in the next 20 years.
- In the Midwest - According to the Insurance Information Institute, there's a 40% to 63% chance the New Madrid Fault (which runs through Arkansas, Kentucky, Missouri, and Tennessee) region will suffer an earthquake with a magnitude of 6.0 in the next 15 years.
What Does Earthquake Insurance Cover, Including Additional Living Expenses?
Earthquake insurance provides insurance coverage for property damage if your home is damaged by an earthquake. A standard homeowner and renters policy will not cover direct earthquake damage, though a homeowners policy may still cover fire damage if an earthquake causes a fire or explosion. Earthquake insurance is a separate endorsement you must buy and add to your homeowner or renters policy.
An earthquake endorsement generally excludes damages or losses from floods and tidal waves – even when caused or compounded by an earthquake. For example, structural cracking from ground shaking would not be covered under the standard policy, while a resulting house fire could be. However, if you experience a loss due to a landslide, settlement, mudflow, or the rising, sinking, and contracting of earth, your endorsement may cover it if the damage resulted from an earthquake.
There are several options to consider when purchasing earthquake insurance, including:
- Does the policy cover only your home? Are other structures, such as garages, also included?
- Will your policy pay for the contents of your home and for additional living expenses if your home is badly damaged or destroyed?
- Are there any exclusions or limitations to coverage?
- What deductible must you pay before the insurance kicks in, and how much will be subtracted from your claims payment amount?
Earthquakes Can Happen in Alabama, Protect Yourself
- Make sure your water heater, gas appliances, and other fixtures are fastened securely.
- Check that bookcases and furniture are secure and fastened to walls.
- Have a family emergency plan that all family members know. Designate a meeting place outside the home where family members can gather once the danger has passed.
- Designate a distant relative or friend who can serve as a point of contact and communication for you and your family members if you get separated.
- Plan. Keep flashlights, batteries, and candles on hand. Have a portable radio.
- Be sure everyone in your house knows how to turn off utilities (electricity, water, and gas).
- When shopping for earthquake insurance, ask the company to help you identify possible repairs and other improvements that support safety and minimize damage; a home that is properly retrofitted may reduce losses further, and your deductible is subtracted from the claims payment amount.
What to do when an earthquake strikes
If you are inside when an earthquake hits, stay inside and get under a heavy table or desk. Stay away from windows. Do not evacuate the building unless emergency personnel direct you to leave.
If you are outside, get away from buildings and power lines, and remember that stone and masonry facings can break loose and fall away from upper parts of buildings.
If you are in a car, stop safely away from structures, large trees, power lines, and other hazards. Stay inside the vehicle.
Keep in mind:
- Don’t use candles until gas lines are checked. Also, check throughout your home before you use certain utilities, such as water and electric, sewage connections, and even chimneys.
- Don’t tie up phone lines except to report emergencies.
- Be prepared. Remember that you will need food and water, even for the short term. Keep your family together and stay alert for aftershocks.
Earthquake insurance needs can vary significantly – talk to us today to find out how to get the best price and value on earthquake insurance for you.
Frequently Asked Questions
About Earthquake Insurance
Report earthquake damage to your insurance company as soon as possible after the loss. Claims must generally be reported within one year of the loss inception, and the insurer may assess damaged areas and belongings after you report the loss. Prompt reporting can help ensure the damage is properly documented, and the claims process can begin without unnecessary delays, which can also help protect your finances by speeding reimbursement for covered losses.
A standard earthquake coverage policy typically includes dwelling coverage, personal property coverage, and loss of use coverage. It can cover structural repairs and replacement of personal belongings damaged by an earthquake, helping you rebuild after covered losses. Loss of use coverage can help pay for temporary living expenses when your home is uninhabitable because of earthquake damage, making it easier to get life back on track.
Earthquake insurance commonly uses a percentage-based deductible that is applied to the applicable coverage limit. Depending on the policy, deductibles can range from 5% to 25%. Choosing a higher deductible can lower your premium, but it also means more money out of pocket after a claim, and you may still need to keep paying the mortgage while repairs are underway. Emergency repairs up to $1,500 are covered without applying the deductible.
Document all visible and hidden damage as thoroughly as possible after one of the most disruptive natural disasters for your claim. Take photographs and videos of affected areas and keep records of repairs, damaged belongings, related expenses, and, where applicable, separate losses such as theft that may be covered under a standard policy even when earthquake damage is excluded. Avoid making permanent repairs until the damage has been properly documented, except when emergency repairs are necessary to prevent further damage.
Earthquake insurance premiums reflect the home's earthquake risk based on location, construction type, age, and foundation type. Retrofitting a home may help reduce premiums by up to 25 percent, and some older homes or homes with another type of foundation may qualify for a discount. The exact premium and available discounts depend on the policy and property characteristics.
You must have a residential property insurance policy, such as homeowners insurance, to obtain a CEA earthquake insurance policy. CEA homeowner policies include building code upgrade coverage, with coverage included up to $10,000. Federal disaster assistance may include disaster loans, but those funds may still fall short of what is needed to recover from major property losses. Federal disaster assistance may not fully compensate homeowners for earthquake losses, so earthquake insurance can provide additional protection for covered damage.
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