Earthquake insurance is a form of property insurance that provides coverage in the event of an earthquake that causes damage to the home or property. In most of the cases, the basic homeowner’s policy does not cover earthquake damages. Even if you do not live in a location where earthquakes are common, you might still need earthquake insurance policy.
How much does earthquake insurance cost?
Different insurance companies determine prices of earthquake policies differently. Several factors are taken into consideration while determining price of the policy, therefore, these prices vary widely. Some of the factors which help in determining price of the earthquake insurance policy include:
Location: Areas are divided on the basis of likelihood of occurrence of earthquake. Insurance prices will be higher for houses located in areas which are more prone to earthquakes.
Age of house: Usually older homes cost more to buy insurance coverage than newer homes. Older homes are more likely to be damaged by earthquakes.
Building material: Homes made of wood will get better rates as compared to the homes made of bricks. Wooden homes tend to withstand earthquake stress better.
Earthquake-proofing: Rates will be better if the home has got earthquake-proofing improvements.
Earthquake insurance is a type of catastrophic coverage; therefore, policies carry very high deductibles. Deductible may range from 2% to 20% of the replacement coverage limit. Earthquake insurance premium can range from a couple of hundred dollars to several thousand dollars annually.
What is covered by earthquake insurance policy?
Typically the earthquake insurance policies split out homeowner’s loss into two categories – structure (the physical home) and the contents (the possessions). An earthquake insurance policy should cover the costs to replace or repair the damaged property. Before buying a policy you should consider the following factors.
Does the policy cover dwelling only or does it include accessory structures like garages?
If your home is severely damaged or destroyed, will your policy cover the contents and additional living costs?
What are the exclusions and limitations to the coverage?
Should i buy earthquake insurance?
If you want to decide whether to buy earthquake insurance policy, you should ask yourself following questions:
Have I considered the potential costs and risks?
Do I have emergency funds which I may be able to use to rebuild my home?
Have I used special construction materials which withstand stress of earthquakes?
Many people decide to go without earthquake insurance policy because of high deductible and high premium costs. But, it should be kept in mind that an earthquake can cause a lot of damage to your home and property or even cause a total loss. Long story short, if you live in a high-risk zone you will pay higher costs for coverage, while those in a low risk zone will pay very little. To rest well knowing that in the event of an earthquake your home can be repaired or rebuilt, it may be in your best interest to add this to your home insurance policy.