The cons of earthquake insurance

The cons of earthquake insurance

If you live in California, you know that it’s just a matter of time before the “Big One” strikes. On July 4th and 5th of this year, two earthquakes of magnitude 6.4 and 7.1 struck near Ridgecrest, 194 miles northeast of the city of Los Angeles.  And, based on historical precedent, the San Andreas Fault system is overdue for a massive quake.

Earthquake insurance on your home is not included in homeowners insurance; you have to buy it separately or ask to have it added to your homeowner’s policy by endorsement. Without earthquake insurance, you could be at risk for a major loss. So, it’s surprising that only about 10% of California residents have earthquake insurance leaving 90% of Californians uncovered. 

What about the 90% who don’t have earthquake insurance?  For many, it’s the added cost of an annual policy because earthquake insurance can be costly depending upon where you live. And, you’ll have a higher deductible to pay relative to that of your homeowners insurance.

So, what are the risks of an earthquake affecting the area in which you live?  There are a variety of factors to consider when trying to determine your risk profile.  View the earthquake hazard map on the California Emergency Management Agency’s earthquake preparedness website to identify specific hazards in your area.

The bad and the ugly

Do you pay the higher price for earthquake insurance or take the risk that an earthquake won’t damage or destroy your home?

Having earthquake insurance protects the financial investment that you have in your personal property. Without it, you’re putting yourself at risk to lose everything or to sustain so much damage to your property that you can’t afford the repairs.  And, if you still have a mortgage on your house, you may be obligated to pay it off even if you’re home is destroyed.

If you’re home is damaged as a result of an earthquake and you’ve purchased earthquake insurance, you’ll have peace of mind knowing that you’ll be covered for repairs or reconstruction vs losing everything or having to borrow even more money to repair or reconstruct your home.

If you’re no longer able to live in your home due to earthquake-induced damage, you may get additional living expenses to put towards another place to live until your home is made livable again.  

When comparing the cost of earthquake insurance to the costs you will incur if you’re home is destroyed or sustains extensive damage due to an earthquake, the cost of earthquake insurance can seem relatively inexpensive!

It’s your decision

After considering the pros and cons of purchasing earthquake insurance, ultimately you’re the one that has to decide whether or not it’s worth the additional cost. Keep in mind that, in addition to the potential to totally destroy your home, there are other kinds of damage that can result from an earthquake, including gas leaks, fires, and damage to additional structures on your property.

If you live in Southern California, you have a significant risk for experiencing an earthquake. Therefore, having earthquake insurance is highly recommended. Daniel Fraisse, insurance broker for earthquake insurance in Los Angeles, can help you choose between available coverage options to find a plan that best fits your situation.