For decades, every time there is a major earthquake in California other cities on the West Coast, experience an influx of Californians displaced or unnerved by the damage that was done to their homes. When interviewed these people say that they loved living in California, but could not fathom rebuilding after sustaining damage to homes that were not covered by earthquake insurance. Although the building codes have changed so that there is less expected damage from large quakes than there would be half a century ago, California and other places have been very fortunate in the last 15 years to have their earthquakes largely fall outside of populated areas.
Earthquake insurance is a type of insurance that will cover the homeowner, or building owner, in the case of commercial property, against any damage that is caused by an earthquake. In California, specifically, the insurance largely covers damage to the home or business and provides a small amount of funds should you need to relocate or replace items that were inside the home. California is often a special case because there have been a record amount of claims there over the past half century and some insurance companies actually went out of business trying to pay all of the claims off after large earthquakes.
Earthquake Insurance Pros
- Even if there is no structural damage to your home, the coverage will replace a certain amount of items that are damaged. Earthquakes are difficult to plan for when it comes to home furnishings. You can do as much as you can and still sometimes end up with a fallen chandelier or an LED television that drops off the wall. Even if you just experience broken plates that are used everyday, you can still file a claim if your things are damaged. Typically, the deductible for damaged items is lower than that of the overall property damage coverage that would be applied to the house.
- If you have to move out of your home for any period of time while your home is put back into a liveable condition, the coverage will help pay for your hotel or lodging elsewhere. A definite benefit for those who need to repair or rebuild their damaged homes.
- Structural damage will be repaired after you pay your deductible. In many cases, if you have an older home, you will end up with a more solid frame in the damaged areas than you had when you started.
Earthquake Insurance Cons
- The premiums can be high if you are in an area where there are frequent earthquakes. Many Californians, for example, have a 15 percent deductible, which means that you would pay $75,000 for repairs out of pocket on a $500,000 home. Of course many people are able to use the policy application process to develop a realistic viewpoint of the home that they are insuring. You may own a $500,000 home, but if you have to actually rebuild it, it may not cost $500,000 to rebuild it. You can therefore work towards a lower replacement cost in order to keep your premiums realistic- although they will still be high.
- If you have a small earthquake in your town and then you decide to get insurance just in case, you may be out of luck. Many insurance companies will place a moratorium on writing new policies in areas that have had a disturbance for a certain amount of time. If you would like to buy a policy but cannot at this time, it is probably a good idea to stick with the idea of getting coverage and then apply when conditions allow.
Today, less than 20 percent of Californians have earthquake insurance, although many are starting to take a look at it for their own homes. Why the change? For one thing, for many people in California they feel it has been too quiet for too long. The average time period after which a large quake hits near a populated area is now well within range in many parts of the state. So for many people, it is not an actual quake that is causing them to look at getting insured, it is the possibility of a quake. Another reason that people from all over the United States have reason to review their homeowner's policies to possibly add earthquake insurance is that like flood insurance, if it happens, it can devastate your financial picture for years to come because your house is usually your largest asset. So as the US emerges from recession and people have more money to make purchases, earthquake insurance is again in vogue.