On Aug. 22, 2011 a magnitude 5.3 earthquake rattled southern Colorado causing minor damage. The quake was felt throughout Colorado and neighboring states.
These events serve a reminder that earthquakes are not just a California problem, as commonly perceived. They have hit every state. In 2010 more than 8,400 earthquakes occurred in the United States, according to U.S. Geological Survey’s National Earthquake Information Center. Nearly 235 earthquakes have been recorded this year in the United States that measured at least 4.0 or higher in magnitude. The most expensive U.S. earthquake occurred in Northridge, Calif. on Jan. 17, 1994. This quake was a 6.6 magnitude and caused more than $18.1 billion in insured losses.
The point is we all need to be concerned about earthquakes, the least predictable of potential natural disasters. With population growth in areas of intense seismic activity, the risk of catastrophic loss of life and property damage continues to rapidly increase. According to the Federal Emergency Management Agency (FEMA) it is estimated that a major earthquake in a highly populated area of the United States could cause as much as $200 billion in losses.
Insurance Coverage
The standard homeowners policy does not cover losses that result from earthquakes due to the unpredictability and widespread catastrophic nature of these events. In addition, it is important to note the standard homeowners policy also does not cover landslides, mud slides or sink holes. However, coverage is generally available as an endorsement to the homeowners policy or under a separate policy.
Under California law, every homeowners insurer is required to offer earthquake coverage every two years. Also in that state, the California Earthquake Authority (CEA) offers basic earthquake insurance coverage for some insurers. The CEA is a privately financed, publicly managed entity. Only insurers who are CEA member companies can sell CEA policies. The basic earthquake policy only covers the dwelling. But now supplemental coverage can be purchased for other structures, such as retaining walls and swimming pools, located on the property.
How Does Earthquake Insurance Work?
Earthquake insurance is designed to provide coverage for catastrophe losses. Consumers are protected from the damage caused by the shaking that results from the movement of the earth.
The deductible for earthquake insurance varies based on the policy and the insurer. These deductibles are generally based on a percentage of the replacement value of the home. The deductible can range from two to 25 percent of the home’s replacement value. In California, the standard deductible is 15 percent. However, for an additional fee consumers can now lower their deductible to 10 percent and raise the limits for contents and loss of use to $100,000 and $15,000 respectively.
If your vehicle is damaged as the result of an earthquake and you have physical damage coverage, the loss would be covered under your auto insurance policy (if purchased).