Why Most Homeowners Are Ignoring The Massive Risk Of Earthquakes

You hope it will never happen to you – but one day it could. That’s the point of insurance - to cover risks that may be unlikely, but could leave you seriously out of pocket if they do.

Why you need it

There’s nothing more damaging than a serious earthquake. If you are a homeowner without insurance and something happens, you risk letting the banks foreclose on your property. You would not only lose what is probably your largest financial asset, but also damage your credit rating, potentially making it difficult to borrow money for years to come.

Earthquake numbers

The US suffers 20,000 earthquakes per year and unlike hurricanes they can happen in any season. The US Geographic Survey in 2014 put 42 states at risk, 16 seriously so. California is the most at risk, but New Madrid, Missouri and Charleston are also a worry.

Cover

Surprisingly, only 18% of Californians have earthquake insurance with the number dropping to 10% nationally. Some may be reassured that their homes are bolted, but no amount of bolting will survive a truly devastating quake. Another cause may be that after the devastating 1994 Northridge earthquake, many insurers removed cover from home insurance policies. The state-run California Earthquake Agency stepped in to fill the gap, but the policies were expensive and provided limited cover.

That situation has now improved, and some private operators are now on the scene making cover more competitive and affordable. The average premium in 2013 was $616, which is a small price to pay when the alternative could be losing everything. FEMA do offer loans for rebuilding, but of course these monies have to be paid back and there’s never any guarantee that the money won’t run out.