Home Owner Insurance and Earthquakes

Did you feel that? It’s a common question in the western United States, where as many as 5,000 earthquakes strike each year. Small ones rattle windows and pictures, as if a large truck rumbled down the street or an aircraft generated a sonic boom. Stronger ones can jolt a sofa or bed, as if a child had jumped on it. Big ones can cause damage, sometimes lots of it.

Most seismic activity occurs on the West Coast, but the rest of the country is not immune from earthquakes. Since 1900, earthquakes have occurred in thirty-nine states and caused damage in all fifty. Some of the nation’s largest earthquakes have occurred east of the Rocky Mountains, including a giant one that struck the New Madrid fault line in the Mississippi Valley in 1812. The New Madrid earthquake was strong enough to ring church bells in Boston, 1000 miles away.

Earthquakes are a major source of property damage in the United States. The Federal Emergency Management Agency (FEMA) estimates that earthquakes cause $4.4 billion a year in losses, making it the fourth leading cause of property damage behind fires ($8.6 billion), hurricanes ($5.4 billion), and floods ($5.2 billion).

Some damage caused by earthquakes is covered by standard homeowner insurance, but other damage is not. For example, an earthquake can cause pipes to burst, flooding a home with water and damaging ceilings, floors, walls, and personal property. Water damage is covered by standard homeowner’s insurance, even if an earthquake was the root cause of the plumbing failure. The same is true for fire damage. An earthquake can twist and break natural gas lines or electrical conduit, sparking a fire. Such damage is also covered by standard homeowners insurance.

An earthquake powerful enough to rupture pipes or ignite a fire most likely will damage the structure of a house. Masonry is particularly vulnerable. Brick walls, chimneys, and fireplaces can crack or even collapse. Tile work on floors and walls can buckle and break. Many homes are built on concrete slabs that can crack during a powerful earthquake. A crack in a slab or a foundation can be extremely costly to repair and might even lead to the condemnation of the property. In a worst-case scenario, an earthquake can cause entire home can collapse. Structural damage to a home caused by an earthquake is not covered by standard home owner insurance.

Even a mild earthquake can damage personal property inside a home. Decorative items and sculptures can topple and break. Mirrors and artwork can fall from walls. Entertainment centers filled with electronics can crash to the floor. Personal property destroyed in an earthquake is not covered by standard homeowners insurance.

To insure a home against earthquake damage, homeowners need to add an endorsement to their existing policy or a take out a separate earthquake insurance policy. Private insurance companies offer earthquake insurance in most states. Because of huge losses from the Northridge earthquake of 1994, many insurance companies refused to write earthquake insurance in California. In response, the California legislature created the California Earthquake Authority (CEA), a government agency that works with eighteen private insurance companies to provide residential earthquake insurance to Californians. The coverage is limited to the dwelling space. It does not cover pools, decks, patios, or other nonessential structures. The idea is to guarantee California homeowners will have a “roof over their heads” if their homes are damaged.

The cost of earthquake insurance depends on the home’s location, age, and construction materials. Because of the lower incidence of earthquakes, homes in the Midwest and East cost less to insure than homes on the West Coast. Insurance for newer homes is less expensive than insurance for older ones, in part because newer building codes in some regions require earthquake-resistant designs and materials. Insurance for wood frame homes costs less than for brick homes because wood is more supple than concrete and block and is more able to “ride out” an earthquake. Deductibles for earthquake insurance are calculated as percentages of the replacement value, rather than a fixed amounts. The deductibles rate can be low as 2 percent and as high as 20 percent, depending on risk and the preferences of the insured. Some homeowners opt for a higher deductible in exchange for lower insurance premiums, believing they will feel it in their wallets long before they feel an earthquake big enough to damage to their home.

A frequent contributor to online and print publications, Bradley Steffens is the author of twenty nonfiction books for children and young adults and coauthor of seven more. His newest book, Ibn al-Haytham: First Scientist, is the first biography to be published in English about the medieval Arab scholar known in the West as Alhazen.