Everything You Need To Know About Earthquake Insurance

Living in California, we’ve all experienced earthquakes of varying strengths and constantly hear we are overdue for the next big quake. Have you thought about what would happen if your property is damaged during a major earthquake? I talked with Susan Ott from Risk Strategies Company to learn more about earthquake insurance and the steps to take to prepare your home for the next big quake. 

Ruth: Who needs earthquake insurance, and how do you know if you need it?

Susan: Earthquake insurance is something that everyone should look into to see if there is a policy that will work well for them and their homes. California is earthquake country, and in the Bay Area, we have two major fault lines, the San Andreas and Hayward fault line, with smaller fault lines riddled all around. 

More importantly, when looking at purchasing a home, one of the first things a home buyer should look at is the foundation of the property. Have an expert determine whether anything needs to be done to harden the home against quakes and protect the structure’s structural integrity. 

An excellent tool to gauge the likelihood of a catastrophic event occurring around the surrounding area is by looking at the RiskMeter. This will give the property a score from 0 to 100 for various events such as flooding, fires, earthquakes, etc., providing over 70 natural hazard risks and building-specific reports.

Ruth: How much does it cost?

Susan: The cost of earthquake insurance will vary from property to property. There are a lot of factors to look at: year built, area, number of stories, type of construction, etc. On average, earthquake insurance will cost a homeowner around $10,000 to $20,000 a year. 

The deductibles also average around 10% to 15% of the property value. Many think the deductible percentage is based on the estimated cost of the damage, but in reality, the deductible is based on the overall property value. For example, if your home is valued at $2 million, your earthquake insurance deductible would be at least $200,000 before insurance kicks in. 

For those who want to work to harden their home, this may result in lower premiums, but retrofitting costs can vary from $10,000 to $100,000. If the foundation of a property is easily accessible, the easier the job would be to retrofit.  If the living space is directly on top of the foundation, the work must start from the exterior, working into the center. This means the siding or stucco of the property would have to be repaired and the house lifted to complete the work. 

Ruth: Are there any alternatives?

Susan: For some, the annual cost of the premiums and the high deductibles make earthquake insurance impractical. It is always a good idea to have separate savings for home maintenance and repairs is always a good idea. Having something set aside for a rainy or shaky day is always a good idea. 

Most of the time, the damage that occurs from an earthquake is from the ensuing fires and explosions. If it is determined the property was burnt down or damaged from a fire following an earthquake, this is automatically covered under regular homeowner’s insurance. This provision is standard under most policies, but it is always best to check. 

Ruth: What else can we do to protect ourselves in the event of an earthquake?

Susan: A couple of tips to prepare for an earthquake are installing a gas shut-off valve and having a go bag/supplies ready. 

With ensuing fire and explosion causing damage after an earthquake, adding a gas shut-off valve to your home is an excellent investment. The valve typically costs around $200, and a plumber can come out to install it. 

Having the necessary supplies can make all the difference during natural disasters. When an earthquake, fire, or any other catastrophe hits, you’ll want to have water (one gallon per person per day for several days for drinking and sanitation), food (at least a several-day supply of non-perishable food), battery-powered or hand crank radio, flashlight, first aid kit, extra batteries/energy packs, any necessary medications and supplies for any pets. 

Once these emergency kits have been assembled, remember to refresh them every few years to ensure that everything is still in working order and replace anything that expired. 

Ruth: Thank you, Susan! For more information on safety preparedness see this article we published back in 2020. And if you found this conversation helpful and want to learn more about earthquake insurance, feel free to reach out to Susan Ott at Risk Strategies Company. 

If you have any questions about real estate, the current market, or just want to catch up please feel free to reach out! I would love to hear from you.