More Americans are at Risk of Damaging Earthquakes

Great Shakeout Earthquake Drill Provides Opportunity to get Prepared

Earthquake Preparedness ToolkitIt is common for people to say “Earthquake? It will never happen here.” However, the number of people exposed to potentially damaging earthquakes is staggering. The United States Geological Survey (USGS) estimates that nearly half of all Americans are at some risk for damaging earthquakes. Approximately 57 million people live in areas with a moderate chance for damaging earthquakes and 28 million are in states with high potential. Reflecting back to the 2014 Napa earthquake it is estimated that the 6.0-magnitude earthquake caused $700 million in total damage and $550 million was uninsured losses.

This year for the first time, the USGS also calculated that nearly 7 million people in central and eastern U.S. are at risk from human-induced earthquakes. Surprisingly, some areas in Oklahoma face a similar earthquake potential as California’s high-risk areas. But in Oklahoma and as well as on the West Coast, where the risk is well known, only around 10 percent of homeowners purchase earthquake coverage.

Despite the damage that earthquakes can cause, few Americans purchase earthquake insurance. Consumers express a wide range of reasons why they don’t purchase the coverage.

Reason #1: I am automatically covered

Some people mistakenly believe earthquake damage is covered by their homeowners insurance. However this potentially costly mistake can be rectified by a quick conversation with a knowledgeable insurance agent. Earthquake insurance is available as a separate policy.

Reason #2: It’s too costly

Another reason many people don’t buy earthquake insurance is their concern regarding the price for the coverage or the deductible that may be required. However, earthquake insurance is important for peace of mind that you’re protected if a catastrophe occurs. Additionally, there are ways for consumers to reduce costs. Insurers may offer lower premiums on wood-frame homes versus ones made of brick or masonry. Frame homes typically can withstand shaking better, whereas brick or masonry homes aren't able to flex with the movement and can crack. If consumers do certain things to mitigate damage to their home they may be able to receive a discount from their insurer. This makes it important for insurers and consumers to discuss coverage options that are available as they vary from company to company.

The deductible for earthquake insurance also varies based on the policy and the insurer. Deductibles are generally based on a percentage of the replacement value of the home. It can range from 2 to 25 percent of the home's replacement value.

Reason #3: Disaster assistance will help me rebuild

There is also the misperception among some consumers that federal disaster assistance will be enough to rebuild and recover from an earthquake or other natural disaster. While disaster assistance is very helpful for temporary housing and emergency home repairs, it does not provide enough to fully repair damaged homes. As a result, when consumers choose not to purchase earthquake insurance they are at risk of not being able to rebuild. Unfortunately, some consumers find this out the hard way.

Earthquakes are the least predictable of all catastrophes but that does not mean that consumers can’t be prepared. It is important for insurance agents to be very knowledgeable about how earthquake coverage works and be able to explain the various options to consumers so they can make an informed decision.

It is also important that customers learn about things they can do to mitigate the damage that may occur from earthquakes. Inexpensive things consumers can do include securing large objects that could fall and hurt residents during an earthquake. Securing water heaters to minimize movement, considering earthquake shut off valves and installing flexible connections to gas appliances can all help reduce damage.

Participate in the Great Shakeout Oct. 20

The Great Shakeout Earthquake Drill October 20, 2016 provides an excellent opportunity for consumers to practice and think about not only what to do when the ground begins to shake, but how they would recover if they experienced property damage. There is generally little to no warning that a quake is about to occur, so advance preparation, both physically and financially with adequate insurance is the key to earthquake recovery.