Earthquake Insurance

Earthquake Insurance:

A common misconception in regards to insurance is that a home owner’s insurance policy covers the home, car and other property for damage from earthquakes.  Earthquake insurance is generally not included in a standard homeowner’s policy.  In California this has become a political issue, evidenced by the fact that residents of California buy more earthquake insurance than any other state.  Although earthquake insurance has been sold in all 50 states, Californians buy the most.  The San Andreas Fault is identified as a continental transform fault that runs for 810 miles, most of the length of California.  The San Andreas, and many smaller yet significant faults, are the worry of much of the west coast. 

 Earthquake Mini Policy:

In 1994 the Northridge earthquake killed 57 people and did an approximated $20 billion in damages.  For a time after that earthquake most insurance companies in California discontinued writing homeowner policies completely due to state requirements under the “mandatory offer law” that companies that offered homeowners’ insurance must offer earthquake insurance.  Eventually legislature created an agency called the CEA, or California Earthquake Authority, which is privately funded and publicly managed.  This agency provided an insurance option enabling companies offering earthquake insurance providers to sell what is called a “mini policy,” which satisfies the mandatory offer law, yet takes the insurers off the hook to provide the monetary backing for claims.

Chances of an Earthquake:

It is estimated by the U.S. Geological Survey that there is a 70 percent chance of one or more 6.7 magnitude earthquakes, the equivalent of the Northridge earthquake, happening again in the next 30 years.  Charleston Southern University in South Carolina sponsors the Earthquake Education Center, which claims that in the eastern U.S. there is a 40 to 60 percent chance of a major earthquake in the next 20 years.  Through the states of Arkansas, Kentucky, Missouri and Tennessee there is the New Madrid Fault.  In the early 1800s an earthquake along this fault line struck these states which was strong enough to change the course of the Mississippi River and ring church bells along the eastern states.  Hence, authorities across the nation have been recommending earthquake insurance. 

 How to Buy Earthquake Insurance:

Although 90 percent of Americans live in areas considered to be seismically active, it is estimated that approximately 12 percent of homeowners actually have earthquake insurance.  Earthquake insurance tends to be expensive and have high deductibles.  The cost depends on many factors including how old the structure is, what it is made of, the geographical area, the details of what is covered, and the coverage limits.  There are concerns such as whether or not the garage is covered in the policy, what the premium is, what the deductible is, and whether the policy benefits include additional living expenses if the home is temporarily uninhabitable or destroyed.  Ideally the coverage should compensate for repair or replacement of damaged property, and all costs incurred in the event of an earthquake. 

Determining whether or not you should have earthquake insurance and what coverage is needed may not be simple problems to solve.  Go with an expert who can avail the best options and has the knowledge and experience to help you.  Chad Olsen and SoCal Platinum Insurance is the broker that can help you make this critical decision, and provide the best solution for insuring in case of an earthquake.