Most homeowners policies don’t cover earthquakes!!

Most homeowner, mobile home, condominium and renters insurance policies do not cover earthquake damage. An earthquake can cause untold devastation. It could damage the foundation of your home, or even worse, result in a total loss. Your home is one of your biggest investments, earthquake insurance may help protect that investment.

What Does Earthquake Insurance Cover?

Earthquake insurance covers direct physical loss to property. Earthquake is normally defined in your policy as “shaking or trembling of the earth, caused by volcanic activity, tectonic processes, or any other cause.” Your policy will be designed to protect your home and belongings in the event of an earthquake.

A standard policy will provide the following coverages:

• Dwelling – Provides coverage up to the limit of your policy
• Personal Property – Covers the items found in your home, like electronics and appliances
• Additional Living Expenses – Pays to cover your temporary housing expenses while your home is being rebuilt or repaired

Earthquake risk in Oregon

Oregon is located in the Cascadia Subduction Zone. Experts have recorded more than 6,000 earthquakes in Oregon, most too small to feel, since 1841. The greatest seismic activity in the past two decades occurred in the Portland metro area and the Klamath Falls area.

Did you know that the state is the tenth most likely state to experience a quake of magnitude 3.5 or more? Even these smaller trembles can damage your home and belongings. As the magnitude of a quake intensifies, so does the likelihood that you will suffer a loss.

Earthquake deductibles

A deductible is the amount you pay before your insurance kicks in. The earthquake insurance deductible typically is a percentage of the insured amount. In other words, the deductible is a percentage of the amount of coverage, not a percentage of the amount of loss. A higher deductible may qualify you for discounts.

Example:

• A homeowner with $300,000 in dwelling coverage and a 10 percent deductible would pay $30,000 before insurance pays.
• The same homeowner with $150,000 in personal property coverage (contents) would have a separate deductible of $15,000.

Living expenses

If earthquake damage to your home is so severe that you must move out, coverage for additional living expenses is available only if you have earthquake coverage. Normally, this coverage is provided with no dollar limit and no deductible. Additional living expense normally extends for up to one year after a loss to pay extra expenses for moving and renting other space while your home is repaired. Check with your agent when purchasing earthquake coverage to make sure that the additional living expense coverage extends to earthquake damage.

What is the Cost of Earthquake Insurance

Costs vary widely based on the type of house, its age, the nature of the soil, and the proximity to known fault lines. Older homes cost more to insure than newer homes. In some cases, older homes may have to be retrofitted to qualify for coverage. Coverage for wood-frame homes costs less than coverage for brick homes, as wood-frame homes “flex” and are subject to less damage in case of an earthquake.

A 2009 survey of the Portland market indicated that earthquake coverage for a wood-frame home insured for $300,000 with $150,000 in personal property coverage could be purchased for $200 to $300 annually. The cost for similar coverage on a brick or masonry home would be higher.

When to Buy Earthquake Insurance

Most insurers place a moratorium on selling earthquake coverage for a period of time after any significant seismic event. So, buy earthquake insurance before an earthquake.

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Reference List:

Oregon.gov. (2021). Division of Financial Regulation: Storm Damage. Retrieved from: https://dfr.oregon.gov/insure/home/storm/Pages/earthquake.aspx