Earthquake Insurance a Good Idea?
Considering the most recent 4 earthquakes have been on the Pacific rim, Japan, Chile, Taiwan, and now Sumatra, it might be a good idea and highly advisable for homeowners in California to consider purchasing earthquake insurance. This is by no means to scare anyone or to say that an earthquake will strike California next week. Just take into consideration that according to the US Geological Survey, California experiences nearly 10,000 earthquakes a year, 15-20 of those are over 4.0 magnitude. Home owners just need a friendly reminder that California lies on the San Andres fault line.
Simply put, California is more prone to earthquakes similar to how Florida is prone to hurricane or flood insurance. Interesting fact is for those who have a mortgage on a home in Florida, it is required by their mortgage lender to have hurricane and wind damage insurance. While there is a big difference between hurricanes and earthquakes in the sense there is no “earthquake season,” both can still cause a lot of damages. While we can’t predict when or where an earthquake will strike next, but considering California is on the Pacific Ring of Fire, the chances of a destructive earthquake happening is significantly higher than an earthquake happening in North Dakota. The Pacific Ring of Fire is an area along the Pacific basin that has a high level of earthquakes and volcanic eruptions.
Earthquake insurance is not typical covered under regular homeowners insurance. You will need to buy a separate policy usually from a private provider. Earthquake insurance is not cheap, and the high cost of insurance is the #1 reason why homeowners in California do not purchase earthquake insurance. However, you have already seen photos and videos of the devastation of an earthquake in Chile and Haiti.
- Shop Around – Look at various insurance providers and compare rates and deductibles. The highest or lowest price might not equate to the best coverage. If you do buy earthquake insurance make sure it is from a reputable company. These are a few major providers in California.
- Some factors that will affect the price of your policy
* California Earthquake Authority (State Department of Insurance): http://www.earthquakeauthority.com/
* GeoVera Insurance: http://www.geovera.com/
* Western Mutual: http://www.westernmutual.com/earthquake-insurance-quotes.asp
* The age of your home – The older the home, the less likely it will survive a major earthquake so your policy will cost more.
* Exterior construction material- Interesting fact is according to research homes made out of wood vs brick are more likely to withstand the stress of an earthquake
* How close you live to a fault line
Homeowners needs to do their research and shop around since earthquake insurance typically have a high deductible based on the value of the home; it can range anywhere from 2-15% the value of your home. Ultimately in the end, it is up to the homeowners to decide if the risk outweighs the cost of insurance while taking into account the financial state of the economy.