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Earthquake Insurance


An earthquake is a scary possibility for many, especially for those who live in higher risk regions. In addition to the possibility of bodily injury, the high cost of potential repairs after such an event can also be hair-raising. Since normal insurance won’t cover damage resulting from a quake, considering earthquake insurance is likely a smart financial move.

Those who live in quake-prone areas like California would be wise to obtain this insurance from various insurance providers. However, it’s a common misconception that only homes in the Golden State are prone to damage from quakes. Interestingly, Alaska notably has more events and there are even quakes popping up in states that are traditionally not considered to be in risk areas. And there are only a shocking number of states where there has never been a recorded quake of 3.5 or greater (8 states). This all means an earthquake in your home region is likely more probable then you might think.

There are, in general, two basic varieties of earthquake insurance available. The first is called “single-limit,” and it can cover the entire appraised value of one’s primary structure. Another type is a standard policy that provides similar additional coverage that a homeowner already has in his or her existing policy, except with the new coverage the homeowner is protected from earthquakes whereas before that would decidedly not be the case. If you feel this is an extra added expense not worth pondering, then consider this: There is a monumental difference between paying a 15% deductible (as is common) as opposed to paying out-of-pocket the total cost of loss due to having no coverage at all. One might be a challenge financially whereas the other could be financially (and otherwise) insurmountable.

Earthquake insurance amounts are usually determined based on a property’s actual value. For example, a $250,000 home can be insured for that full amount, especially if it is located in a higher-risk area. In this instance however, the deductible will be a pre-determined percentage of the total coverage, again usually about 15 percent. Usual exclusions include valuable jewelry, any improvements done to landscaping, swimming pools, and other buildings on one’s property such as a garden shed or a detached garage. There are exceptions and one can often obtain extra coverage, but in most instances these things will not be included in a typical earthquake policy.
Policy specifics often vary from state to state, so you need to research carefully. Again, keep in mind that coverage likely won’t include everything outside of the home and that some policies have limits as to how much can be paid out to repair or replace damage and loss.

An added bonus in acquiring this kind of coverage extends to the likelihood that you could be provided with some compensation for alternative housing while the damage to your home is being repaired. But, as often happens in the aftermath of such disasters, rent and hotel rates can hit the roof. Consequently, the amount of coverage you might receive will likely not get all those bills paid.

Remember that the more your property is valued, the higher your deductible will be. Be sure to have money set aside so that you will be able to pay your deductible should an earthquake strike.