California Homeowners Lack Adequate Earthquake Insurance

Earthquakes pose a very real risk to homeowners and residents all throughout the state of California. According to the California Earthquake Authority, most California residents live within 30 miles of an active fault, yet only about 10% of homeowners carry earthquake-specific insurance coverage. Earthquakes are a very real threat to Californians, with moderate earthquakes (5.5 to 5.9 magnitude) occurring three to four times per year and lesser magnitude earthquakes happening on a daily basis.

While California hasn’t experienced a truly damaging earthquake in several years, just a little further south in Mexico, there were two separate and devastating earthquakes in the month of September, 2017. Despite the mounting warnings of “the big one,” there is still an extreme lack of earthquake insurance coverage for California homeowners. Earthquake insurance is not included even in the most comprehensive homeowners’ insurance policies and must be purchased separately. Here are a few more common myths and truths regarding earthquake insurance:

Myth #1: Earthquake damage rarely exceeds deductibles.

After the 1994 Northridge Earthquake, the homeowners’ insurance market in Southern California was nearly destroyed. Insurance companies quickly found out that they were not prepared for the damage an earthquake could cause in heavily populated areas. In order to keep earthquake insurance affordable, deductibles needed to be higher. The average earthquake insurance deductible is 15% of the home’s value, so for a home valued at $400,000, it would need to incur $60,000 in damages before the insurance policy would pay. It is true that minor damage would not exceed an earthquake policy’s deductible. However, after the 2014 earthquake in Napa, many homeowners found themselves with red and yellow-tagged homes, resulting in the need for over $8 million in housing assistance grants from FEMA.

Myth #2: FEMA will give me enough money to rebuild.

While FEMA indeed offers grants for disaster relief, it is not like an insurance payout. Homeowners who receive grants from FEMA for earthquake assistance still have to pay that money back to the government. In addition, the money may not be readily available until well after it is needed, as it has to go through an approval process in Congress prior to being paid to homeowners.

Myth #3: My home has survived plenty of earthquakes, it will be fine.

Earthquakes occur on different fault lines, each affecting homes in their distinctive areas in a variety of ways. Earthquakes on some faults may be felt minimally or not at all, while those that occur on other faults in the same region may cause irreparable damage to those homes. In addition, normal wear and tear due to age and micro-damage from small earthquakes can weaken homes and make them more susceptible to major damage in the future.

About The Insurance Store

The Insurance Store was created to bring ease and agility to Surplus Lines coverage placement for agents serving commercial and personal lines clients in specific regions throughout the country. We provide a wide variety of packages for hard-to-place products and risks that include earthquakes, floods, hail, and more. To learn more about how we can protect you in the event of an unforeseen event, contact us today at (425) 313-9605.

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