Fewer American homeowners are buying earthquake insurance — and the risk is growing!
The most recent data from the California Earthquake Authority shows that only 12 percent of California homeowners currently carry earthquake insurance and in the Napa area, which was one of the hardest hit, a mere 6 percent carry earthquake protection.
According to the U. S. Geological Survey, the recent earthquake in the San Francisco Bay area, which registered 6.0 on the magnitude scale, is estimated to have caused roughly $1 billion in economic losses. Much of the damage was suffered by homeowners and unfortunately, many of them were not covered.
The quake injured more than 100 people and caused damage to dozens of buildings in the Napa and Vallejo region of the state. The quake also sparked a fire that ended up burning six homes. The quake was the largest in the area since 1989 and hit 3 miles northwest of American Canyon.
A large number of homeowners who suffered damage to their homes were unpleasantly surprised when they learned that they would be on the hook for the damages. The most recent data from the California Earthquake Authority (CEA) shows that only 12 percent of California homeowners currently carry earthquake insurance and in the Napa area, which was one of the hardest hit, a mere 6 percent carry earthquake protection.
The number of homeowners carrying earthquake coverage has been on a steady decline for years. Data from the Insurance Information Institute (III.org) shows that only seven percent of homeowners across the country have earthquake insurance, which is down from 10 percent last year. In the western part of the United States, which is more prone to earthquakes, that number is 10 percent, which is a huge decline from 22 percent last year.
When the last major earthquake struck the Northridge area in California back in 1994, a full 30 percent of homeowners were covered. The Northridge quake killed a number of people and caused roughly $44 billion in damages. While this earthquake made clear the value of earthquake coverage, it appears that 20 years later, homeowners are willing to roll the dice, this can be a huge mistake.
Earthquake damage that is caused by water or fire should be covered by a standard homeowners policy but damage related to the “shaking” caused by an earthquake is not covered, a separate policy must be purchased. In most cases these separate policies carry a 15 percent deductible. The cost of these policies varies depending on the value of the house as well as its location.
As an example, expect to pay roughly $1,500 a year to cover a $1 million property in the Napa region. While this may seem expensive, it will be a drop in the bucket if your home is destroyed and it is up to you to cover the rebuilding costs.
Experts predict that there will soon be a surge in the purchase of earthquake protection as the recent quake reminds homeowners of the value of an earthquake policy. However, they also acknowledge that a number of homeowners will probably still forgo earthquake insurance due to the high deductible and their belief (or hope) that the damage to their house will be minimal.
High deductibles can make earthquake coverage a hard sale. On a $200,000 policy, the homeowner will be responsible for the first $30,000 of damage which can be daunting for a typical homeowner.
While it can be tempting to forgo coverage, recent statistics show that the risk of earthquake damage is actually increasing. The U.S. Geological Survey recently released an updated seismic hazard map which indicated an increased earthquake risk for roughly half of the country. A total of 42 states currently have a “reasonable” chance of experiencing a damaging earthquake in the next 50 years.
California, as always ranks high on that list, but it’s not the only state with an increased chance of earthquake damage. The Pacific Northwest jumped up the list with geologists focusing on the Cascadia subduction zone, which while less famous than the San Andreas and Hayward faults in California could eventually prove more deadly.