Most people in the United States think they are safe from earthquakes, unless they live in California, of course. But the reality is that just in the last few years there have been earthquakes in other "safe" states such as Virginia, Colorado and Oklahoma.
According to the earthquake map on the U.S. Geological Survey website there are only 8 states in the U.S. that haven't had a 3.5 or greater magnitude earthquake in the 3 decade period from 1974 to 2003. And, even though these states didn't record an earthquake in that time frame, that is not to say that they are safe. Since they are all surrounded by states that do have more frequent earthquakes, residents of these states are still susceptible to damage from a quake in a neighboring state!
And, if you think that only people living in California have to worry about earthquakes, think again, here is a list of the top 10 states with the highest number of earthquakes during the time frame of 1974 - 2003 in order of highest number of quakes to lowest:
If earthquakes are so common, why do so many homeowners opt not to get earthquake insurance? I recently interviewed Glenn Pomeroy, CEO of California Earthquake Authority and asked him that same question.
According to Glenn there are several reasons homeowners don't invest in earthquake insurance:
1. They basically believe that the odds of an earthquake happening aren't that large so they don't want to spend the money on earthquake insurance.
2. Many people mistakenly believe that the U.S. government will help them with repairs after an earthquake. The truth is that some federal money may be available but it will be in the form of a loan and you will need to pay it back.
3. It's just too expensive and the deductibles are too high. And since most banks don't require earthquake insurance, consumers don't want to pay for it.
While earthquake insurance may not be for everyone, it is important to understand the ins and outs of earthquake insurance so you can determine whether or not you should add coverage. Remember too that standard homeowners policies do not cover damage from earthquakes.
There are some significant differences between an earthquake policy and standard homeowners policies that you need to be aware of:
1. A major difference between an earthquake policy and traditional homeowners policy is the way the deductible is handled. With standard homeowners policies you can decide how high you want your deductible to be in dollars. The higher the deductible the lower the premiums you will pay.
But with earthquake insurance your deductible is a percentage of the policy limit. The percentages can range from 2% all the way up to 15%. The higher percentages are found in states with the highest likelihood of earthquakes, as you would expect.
The bottom line is that you will almost be guaranteed to pay more out of pocket costs with an earthquake policy than you would with a traditional homeowners policy.
2. The way the insurance policy covers personal possessions is also quite different between traditional homeowners policies and earthquake insurance. Normally, personal possessions are covered at a percentage of your policy limits. So, for example, if your home burned down and it was insured for $500,000 and your coverage was for 70% of policy limits you would get $350,000 to replace your belongings.
But with an earthquake policy possessions are only covered to a set dollar amount, say $5,000. The logic being that after an earthquake many possessions will still be intact. Furniture, mattresses, etc. are often still usable after an earthquake but not usable after a fire or flood, for example.
Of course, some items such as electronics, may be more susceptible to damage in a quake, so you may want to invest in additional coverage.
3. What is excluded? As with traditional homeowners policies, earthquake insurance also has exclusions. Traditional homeowners policies only cover things like jewelry, furs, home office equipment, etc. to set amounts. If you have more invested in these items than your policy will cover, you will need to add additional coverage in the form of a rider to make sure you have adequate coverage.
Most earthquake insurance policies excludes coverage on items such as your landscaping, pools, fence, detached structures such as shed or garages, chandeliers, fine china or crystal.
As you can see, there are several significant differences between the way earthquake insurance works versus traditional homeowners insurance.
Of course, this is just general information and could be different in your area. It's always best to talk to a reputable agent in your locale to determine if earthquake insurance makes sense for you.