Since 2005, earthquakes powerful enough to be felt by people have occurred in 40 of the 50 states, according to the United States Geological Survey. Not surprisingly, Alaska, California, and Hawaii lead the nation in frequency and size of earthquakes, but other states have significant numbers of quakes as well. For example, New York had 25 perceptible earthquakes from 2005 to 2007. Maine had 12, and Tennessee had 10. From Florida (2) to Washington (18), America is earthquake country.
According to the Federal Emergency Management Agency (FEMA), earthquakes are responsible for $4.4 billion worth of property losses each year, fourth among leading causes behind fires ($8.6 billion in losses), hurricanes ($5.4 billion in losses), and floods ($5.2 billion in losses). Insuring against earthquake losses is tricky. Here are five things you should know:
1. Standard homeowner insurance does not cover structural damage caused by an earthquake's shaking. The violent shaking of an earthquake can seriously damage any building, including a home. Structures made of brick and stone, such as walls, fireplaces, and chimneys do not have the flexibility to bend very far without cracking or even collapsing. That same goes for tile work. As a result, floors, bathroom walls, and kitchen backsplashes are especially vulnerable to shaking damage. Many homes, particularly in the western United States, are built on concrete slabs that can crack as the ground moves in waves beneath them. Concrete foundations also can develop fissures, compromising their integrity. If the damage is severe enough, the home could be condemned and, in severe cases, torn down. Structural damage caused by an earthquake is not covered by a standard homeowners insurance policy.
2. Personal property losses due to shaking are not covered by homeowner insurance. Many earthquake-conscious homeowners take care to secure antiques, sculptures, and artwork to tables, shelves, and walls. Despite these preventative measures, a strong earthquake can dislodge valuable objects and send them crashing to the floor. The same is true for electronics: the sudden jolt of an earthquake can send a wall-mounted television flying toward oblivion, or cause an entire entertainment center to collapse, crushing fragile electronics. Personal property damaged due to shaking is not covered by traditional homeownerswiz.com homeowners insurance.
3. Traditional home owner insurance covers indirect damage resulting from an earthquake. Roughly half the damage caused by earthquakes is from shaking. The other half occurs in the aftermath of the quake, when systems damaged by the shaking fail. For example, extreme ground motion can bend pipes to the breaking point. If a natural gas line ruptures, the released gas can cause an explosion or fire. Similarly, if a water line bursts, it can cause flooding inside a home, destroying drywall, flooring, carpeting, clothing, bedding, books, electronics, artwork and more. This kind of indirect damage to a structure or personal property is covered by traditional homeowners insurance.
4. Earthquake insurance must be purchased separately. It is possible to insure your home against damage cause by an earthquake, but it requires buying a separate earthquake insurance policy or an earthquake endorsement to an existing policy. In California, limited dwelling protection is available through "mini-policies" backed the California Earthquake Authority (CEA), a governmental agency. The cost of earthquake insurance varies, depending on several factors, including where you live, the age of your home, and the materials used to build it. Rates are higher in active earthquake regions, of course. Older homes cost more to insure than newer ones because they often were built to less stringent earthquake building codes. Brick and block homes cost more to insure than wood-framed homes, because they are less flexible and more prone to structural damage.
5. Earthquake deductibles are calculated as a percentage. Earthquake insurance deductibles are based on a percentage of the replacement cost of the home. They can range from as little as 2 percent of the home's replacement cost to as high as 20 percent. Some homeowners opt to pay the higher deductible in order to keep their premiums low. Accepting a higher deductible comes with risks, though. For example, a 20 percent deductible on a home that will cost $250,000 to rebuild means that the homeowner will pay $50,000 of the costs. That is fine, if you have $50,000 in the bank. If you are thinking about borrowing against your home equity, you have a problem: A home with $50,000 worth of damage, or more, will not be worth what is was before the earthquake occurred. The home equity might disappear in the rubble.
Losing the equity in your home is bad enough, but losing the ability to rebuild is even worse. That, of course, is the danger you face if you do not have earthquake insurance. Worse yet, you still will be responsible for paying your mortgage. The odds of having your home damaged or destroyed by an earthquake may be slim, but the financial risks are too great to ignore, no matter where you live. If "the big one" hits, you do not want to be standing in your driveway, looking at the devastation and wondering what you will do next.
An award-winning author of books for young adults, Bradley Steffens is a frequent contributor to online and print publications, including Discovery Channel Magazine, Gig, and Broker Agent Magazine. A copywriter with 25 years experience, he creates website content and blogs for a range of professionals, including edenaquaponics.com aquaponics consultants and independent health insurance agrents. His most recent book, Ibn al-Haytham: First Scientist, is the world's first biography of the medieval Muslim scholar known in the West as Alhazen.
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