Do I Need Earthquake Insurance?

Read this quick list of factors to consider and weigh your risk carefully.

  • Earthquake insurance is not part of your homeowner’s policy, it’s an additional insurance coverage that must be purchased separately.
  • The most earthquake-prone states in the U.S. are Alaska, California, and Hawaii, with Texas coming in at number 17. Most of the recorded earthquakes in Texas have been located in Eastern Texas, Texas Panhandle, and Western Texas.
  • Factors to consider:
    • Your risk:
    • Your premium – varies greatly depending on where you live. Coverage in high risk areas can be extremely expensive (prohibitive even), leading some to refer to earthquake insurance as a “luxury” and not a necessity. New or old construction, brick or wood frame home?
    • Your deductible – it’s usually 10-15% of the home’s value – meaning that for a $200,000 home you’ll be responsible for $20,000 out of pocket with a 10% deductible before insurance will kick in. Compared to flood coverage, which has a relatively low deductible compared to the amount of damage that can be covered, earthquake insurance has a high deductible.
  • What does earthquake insurance cover? Includes coverage for damage to the foundation or basement, the overall structure, and damage to the interior of the home as a direct result of an earthquake. It may not cover flood that results from an earthquake, whether caused by tidal wave, tsunami, or otherwise. Many plans don’t cover personal belongings or accessory buildings such as garages unless you add additional coverage.
    • Buy replacement cost coverage, not “market value” coverage – replacement cost coverage pays for the cost of rebuilding or replacing the home. “Homes also have a ‘market value,’ and what they might bring on the market is not necessarily what it would cost to rebuild or replace it if there were a fire, tornado, or earthquake,” Stephenson said. “It is the replacement cost that a person should insure for.”
  • When it comes to earthquake coverage, it’s best to think of it in terms of what the chances are of catastrophic loss due to an earthquake. If you’re in an area that is not prone to serious earthquakes, the cost of the premium and/or deductible may not justify purchasing the coverage. However, if you live in a high risk area where your home is at risk of being completely destroyed as a result of an earthquake, it’s the difference between being responsible for 10-20% of your home’s value (depending on deductible) or 100%, which could mean a difference of tens or hundreds of thousands of dollars.

We know there are many other questions that you may have – contact us to evaluate your needs.

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