Is Earthquake Insurance Worth It?

by Kanopy Insurance

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If you live in California or any other state near the San Andreas Fault, chances are you know all about the earthquakes. And, if you’ve experienced an earthquake yourself, you understand why earthquake insurance is worth the investment.

With roughly 600 miles of the San Andreas Fault spanning from southern California to San Francisco, many California residents are at risk of experiencing an earthquake. Southern California alone gets hit with 10,000 earthquakes each year.

You may be telling yourself that you don’t have to worry about earthquake insurance because your homeowners insurance covers it. Well, guess again. Homeowner's insurance does not cover the costs of damages to your home. In this article, we discuss the pros and cons of earthquake insurance to help you choose if it’s right for you and your family.

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Does Earthquake Insurance Make Sense?

If you live in California and don’t have earthquake insurance, then join the 88% of people living in California who don’t have earthquake insurance. Experiencing an earthquake is basically a rite of passage in California. Here’s the thing, though: You have to assess your risk.

To assess the risks in your area residents can do the following:

  • Start by consulting this map from the USGS which tells you how often scientists expect damaging earthquakes to occur in different areas.
  • Study fault lines in the United Statesto get an indication of where the risks of earthquakes are greatest. You may be surprised to learn that you're closer to a fault line than you realized.
  • The Insurance Information Institute publishes many useful studies, papers, and articles about earthquake risks in different regions of the United States.
  • Understand that the cost of earthquake insurance varies depending on many factors like the material used to build a home.
  • Premiums and deductibles are lower in other parts of the country that are less seismically active. Keep in mind that earthquakes can occur in such areas, which makes earthquake insurance a worthwhile investment if you want this protection.

Earthquake Insurance: Pros & Cons

People will not purchase a home without reading all the fine print on their homeowner’s insurance policy. The more they understand, the better. But when it comes to earthquake insurance, people don’t really pay attention. The policy usually includes a high cost and move on. That’s why we’re giving you the lowdown on the pros and cons of earthquake insurance. Here are some of the pros and cons of earthquake insurance.

Pros

  • If your home is damaged in an earthquake, your insurance provides coverage pays for repairs or reconstruction. In some cases, the alternative would entail losing everything. Without earthquake insurance, a major earthquake could potentially leave you homeless.
  • If you live in a lower-risk region, earthquake insurance is significantly cheaper. You might be able to get a policy for as little as $20 per month.
  • In cases where an earthquake makes your home uninhabitable, your insurance may cover living expenses to live elsewhere while your home is repaired. If you're making mortgage payments for your home, this at least means you have somewhere to live while you're paying. Otherwise, you could be making monthly payments for a home that you can no longer live in.
  • People buy insurance for psychological as well as practical reasons. Earthquake insurance leaves you with peace of mind and helps you avoid the anxiety of worrying that your home and belongings could be wiped out in an earthquake.

Cons

  • In states with the highest risk for earthquakes, such as California, earthquake insurance can be very costly. You have to look at your budget and decide if it's worth it for you to pay for insurance or live with the risk and save money.
  • Even with earthquake insurance, you'll have a very high deductible to pay relative to the deductible on your regular home insurance policy. Earthquake insurance deductibles are often calculated as a percentage of the coverage for the entire home.

Only you can ultimately decide whether the pros outweigh the cons, of course. You always have to consider the particulars of your situation, such as your location, the value of your home, the cost of earthquake insurance in your area, and your current financial situation.

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Why You Need Earthquake Insurance

As with any insurance, it's essential to do thorough research on the benefits and drawbacks of a policy. Earthquake insurance, however, is a little different from most other types of policies. People often fall back on the attitude of "it won't happen to us." Even if areas where earthquakes are common, after all, truly devastating ones are rare. However, this point of view leaves you vulnerable to some truly catastrophic outcomes.

The fact is if you live in an area where earthquakes are a significant risk, not having earthquake insurance is a big gamble with your future.


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