According to ABC News, the U.S. Geological Survey states there’s a 46 percent chance that California will experience a 7.5 earthquake — or one of a larger magnitude — in the next three decades. Unfortunately, scientists don’t know precisely when the “Big One” will actually occur. Nevertheless, they’re agreed on one thing: When it does happen, it has the potential to be devastating. Experts predict that hundreds of people could lose their lives and tens of thousands could be injured. Moreover, there could be more than $200 million in damages to the Golden State’s economy.
Despite the fact that even smaller quakes can and do cause significant damages, according to the New York Times, only approximately 10 percent of Californian households currently have earthquake insurance. Yet with the rise in mudslides and fires in the state, a growing number of people are thinking about purchasing this kind of coverage. If you’re one of them, here’s what you need to know.
Earthquakes Aren’t Covered by Homeowners and Renters Insurance
As the Insurance Information Institute explains, a regular homeowners or renters insurance policy doesn’t cover damage resulting from earthquakes. However, if a fire breaks out after the quake, the policy does cover any losses ensuing from the fire, as well as the costs of accommodation if you’re displaced.
What Does — and Doesn’t — Earthquake Insurance Cover?
Earthquake insurance covers the costs of replacing personal belongings, including clothes and other possessions. It also covers the costs of living expenses if your home is unlivable for a while. This is referred to as additional living expenses or ALE and may include everything from accommodation to storage costs and from restaurant meals to rental furniture. In addition, it pays for any repairs to the structure of your home and — if applicable — garage.
Because various policies cover various types of damages, earthquake insurance doesn’t cover everything. For example, fires are typically covered by your homeowners or renters insurance policy, so earthquake insurance doesn’t provide coverage for them. It also doesn’t cover floods or sinkholes that occur as a result of an earthquake. You would need to purchase separate coverage for both. Damage to cars and other vehicles also isn’t covered. They would, however, be covered under the optional comprehensive coverage of an auto insurance policy.
How Much Earthquake Coverage Do You Need?
As we’ve seen above, earthquake insurance covers the costs of repairing your home, replacing your personal belongings, and staying in temporary accommodation in the event you’re displaced for a while.
If you’re a homeowner, you’ll need coverage for all three of these factors. If you own your home, you’ll typically be looking at the same amount of coverage for your dwelling as you have in your homeowners insurance — in other words the amount it would cost to rebuild your home. Of course, if you rent your home, you don’t need any coverage for your dwelling, since it will be your landlord or property manager’s responsibility to repair the structure.
In most cases, the basic coverage for personal property will be 10 percent of the coverage for your dwelling or, for renters, $5,000. Regardless of whether you’re a homeowner or a renter, you can ask to raise the amounts if an appraisal reveals that you’d otherwise not have sufficient coverage. ALE coverage is usually set at a maximum dollar amount per day for a certain amount of days.
Deductibles
Earthquake insurance deductibles are typically higher than homeowners and renters insurance — usually between 10 and 15 percent of your insurance policy’s limit. However, a growing number of insurers are offering deductibles as low as 5 percent to encourage more people to purchase this type of coverage.
Conclusion
If you live in California, the chances are very real that one day, you’ll experience a major earthquake. For this reason, it’s essential that you protect your loved ones, yourself and your property. To learn more about earthquake insurance, contact us today. At Grand Mutual Insurance, we have licensed insurance agents to help find the best package to protect your business and personal life.
