napa valley property earthquake insurance

Is Earthquake Insurance Worth Having?

Having experienced the violent, 6.0 earthquake that hit Napa Valley at 3:20 a.m. on August 24th, the answer to this question for me is a resounding “yes!”

I was wide-awake when the quake hit. It felt like my new home had come off the foundation and was moving back and forth by a foot or two. Miraculously, not one thing in my home, inside or out, moved an inch.

Unfortunately this was not the experience for many residents of Napa, Yountville and Oakville. Many people lost everything in the quake – their homes were trashed and commercial buildings in downtown Napa suffered severe damage while gas and water lines broke. The estimated damage is approximately $1 billion.

According to Bloomberg Business, 8 out 10 Californians don’t buy earthquake insurance. The percentage of homeowners with earthquake insurance in California and across the U.S. has in fact declined, despite rising estimates of the risk for an earthquake.

Here on the west coast, where earthquakes are prevalent, 10 percent of homeowners have coverage, down from 22 percent a year ago. In California, about 12 percent have coverage, according to the California Earthquake Authority – the largest market share writer of earthquake insurance.

Even with a notable increase in earthquakes, homeowners are still apprehensive to make the purchase. The primary reason is the high deductible and high premiums.

The deductible is typically 10-15 percent of the amount you are insured for. The coverage is the amount you insured your home for, not the replacement cost. Standard earthquake insurance does not cover additional buildings such as guest houses, garages, barns, pools or landscaping and some policies do not include demolition costs, mortgage after incident costs or relocation costs.

earthquake insuranceWhen determining whether or not earthquake insurance is worth it, consider the following questions:

  • If you own your home, how much equity do you have in your home? Can you afford to risk losing that equity if an earthquake damages or destroys the home?
  • How much would it cost to rebuild your home? Do you have assets available to repair or even rebuild your home after an earthquake?
  • Do you have a mortgage, second mortgage or line of credit on your home? Can you afford to continue repaying those loans while also paying to rebuild or replace your home?
  • If you have to find temporary accommodations because you cannot live in your home as the result of an earthquake, how much will you need to pay for those additional living expenses?
  • Can you afford to replace your furnishings, appliances, art and all your personal possessions if they were destroyed in an earthquake?

Keep in mind that the insured value of your dwelling for your earthquake policy is the same as the amount of coverage specified in your homeowner’s insurance policy. If you are underinsured on your homeowner’s policy, you are underinsured on your earthquake policy, as well.

What Earthquake Insurance Covers

Typically, earthquake insurance covers damage to your home and your possessions. Most policies also cover costs incurred to minimize further damage after the earthquake and minimal costs for additional living expenses.

The cost of earthquake insurance varies, depending on the scope of coverage, type of structure and your location (e.g., in an earthquake zone). Coverage can be purchased as an endorsement to your existing homeowner’s insurance or as a separate policy.

Common Earthquake Insurance Exclusions

All insurance policies have exclusions. Some of the most common exclusions in earthquake insurance are the following:

Fire. Earthquake insurance doesn’t protect your home against fire, even if the blaze was caused by the earthquake. Your standard homeowner’s policy covers that.

Vehicles. Vehicles are not covered under homeowner’s or earthquake insurance policies. Cars and other vehicles are covered for earthquake damage under the comprehensive part of an automobile insurance policy.

earthquake insuranceFlood. Earthquake insurance does not cover external water damage, such as sewer or drain back-up, flood or tsunami. You will need flood insurance for that.

Exterior Siding. Some earthquake insurance companies do not cover the replacement of masonry veneer – brick, rock or stone that covers the outside of your home.

Purchasing Earthquake insurance is a decision every homeowner should entertain, given the potentially devastating repercussions.

Recently, the U.S. Geological Survey updated its seismic hazard maps for the first time since 2008.

They reported, “In California, earthquake hazard extends over a wider area than previously thought. Most notably, faults were recently discovered, raising earthquake hazard estimates for San Jose, Vallejo and San Diego.“

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