Earthquake Insurance – What Washington needs to know
What does earthquake insurance cover?
Earthquake insurance is a form of property insurance that provides coverage if your home is damaged by an earthquake. Most standard homeowners and renters policies will not cover earthquake damage. Earthquake insurance is usually a separate endorsement you must buy and add to your homeowner or renters policy, or purchase a separate earthquake policy.
There are several things to consider when purchasing earthquake insurance, including:
- Does the policy cover only your home? Are other structures, such as garages, also included?
- Will your policy pay for the contents of your home and for additional living expenses if your home is badly damaged or destroyed?
- Are there any exclusions or limitations to coverage?
- What deductible must you pay before the insurance kicks in?
Most earthquake insurance policies feature a high deductible, which makes this type of insurance useful if the entire home is destroyed, and less useful if the home is merely partially damaged. Rates depend on location and how close you live to known fault lines and the probability of an earthquake, and the stability of the soils in your area and the type of home. Rates are generally less expensive for homes made of wood, which withstand earthquakes better than homes made of brick or stone.
Deductibles: The amount of money you will be responsible to pay without help from insurance is called a “deductible.” With earthquake coverage, your deductible is based on a percentage of your overall policy limit. If the structure of your home is insured to $500,000, the quake insurance deductible will typically amount to 15% of that, or $75,000. Some companies still offer a lower deductible of 10% of the dwelling or policy limit.
Personal possessions: If your home is destroyed by fire, your home insurance would pay to reimburse you for the loss of all the contents of the house to a set threshold – generally 70% to 75% of the dwelling coverage limit. So a homeowner with a $500,000 in dwelling coverage would typically receive up to $350,000 for the contents in addition to the losses sustained to the structure of the home. With earthquake coverage, contents are typically covered only to a set dollar amount, such as $5,000 or $10,000.
Exclusions: Every policy excludes some items from coverage, or sets specific limits on how much the homeowner could be reimbursed for them. The typical quake policy does not cover the loss of landscaping, pools, fences, and detached structures (including garages) — and is likely to exclude claims for broken chandeliers, crystal and china. Earthquake coverage generally excludes damages for losses from floods and tidal waves – even when caused or compounded by an earthquake. However, if you experience a loss due to a landslide, settlement, mudflow, or the rising, sinking and contracting of earth, your endorsement may cover it if the damage resulted from an earthquake.
Loss of use: A standard homeowner’s policy will pay to put you up in alternate lodgings if you’re forced to move because your home has been damaged in an insured disaster. Typically insurers limit this coverage to 20% of the dwelling limits or base it on a set amount of time, such as 12 to 24 months following the disaster. Loss-of-use limits in quake coverage are far more restrictive. Usually, the loss of use coverage is set at a dollar amount that can be as low as $1,500.
Uncovered losses don’t count toward the deductible: All of the restrictions on quake coverage are likely to cause homeowners with quake losses to have far more in out-of-pocket expenses. But the fact that you have, say, $100,000 in uncovered losses to your pool, fences, patio and personal effects, for instance, generally does not help satisfy the deductible. Policies can vary, so be sure to read yours carefully. But between uncovered losses and deductibles, the out-of-pocket hit to homeowners can be devastating in a quake.
Do I qualify?
Some companies require homes built before 1980 to be retrofitted to qualify. Retrofitting involves bolting the home’s sill plate to the foundation, bracing and reinforcing cripple walls and strapping water heaters to the studs in the home’s walls. Regardless of whether you choose to buy a quake policy, making these changes could reduce your losses in a major quake.
Keep in mind insurance companies will generally put in a place at least a 30 day moratorium on writing new policies immediately following an earthquake.
The best way to know if you qualify is to call us.
Do I really need it?
Insurance is always a gamble as to whether you will end up needing it. The experts say the Pacific Northwest has experienced quakes as powerful as the one that devastated Japan. They just don’t happen as often, and on average every 300 years. With the last major quake happening 312 years ago.
In all likelihood, almost the entire US would be better protected by purchasing earthquake insurance. Consider the facts:
- In the West: According to the U.S. Geological Survey, there is a 70 percent probability that one or more damaging earthquakes of magnitude 6.7 or larger will strike the San Francisco Bay area during the next 30 years.
- In the East: The Earthquake Education Center at Charleston Southern University claims there’s a 40 to 60 percent chance of a major earthquake somewhere in the eastern United States in the next 20 years.
- In the Midwest: According to the Insurance Information Institute, there’s a 40 to 63 percent chance the New Madrid Fault (which runs through Arkansas, Kentucky, Missouri and Tennessee) region will suffer an earthquake with a 6.0 magnitude in the next 15 years.
Earthquake insurance needs can vary significantly – talk to us today to find out how to get the right earthquake insurance for you.
Is Earthquake Insurance worth the added cost?
A home being declared a total loss from a fire is more common than a home being declared a total loss from an earthquake. Homeowners are far more likely to lose unreinforced masonry, such as chimneys, brick walls and stone or brick fascia. Catastrophic claims, however, are more likely to occur in certain areas — such as beach cities like Seattle and areas where the underlying ground is sandy and likely to suffer from something called “liquefaction” — than in cities, where the ground is predominantly stone or clay. In addition, the older the home, the more likely it is to have “cripple walls” that are likely to collapse in a major quake; and an unbolted foundation, which increases the risk that the house could shift off the foundation and sustain massive damage as a result.
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