Bay Area Could Face Problems Due to Lack of Earthquake Insurance

Our home is the most significant investment we have and protecting it is a major priority for all of us who live in California. Mother Nature can be pretty brutal here – from brush fires, to flash flooding, to the most dreaded of all wake-up calls – the early morning earthquake. Homeowners insurance policies don’t directly cover earthquakes, which is why a separate earthquake insurance policy was specifically designed to deal with the issue a number of years ago.

The San Francisco region is no stranger to the devastating impact powerful earthquakes can have. In fact, the entire state of California is familiar with their effects. But, according to a risk management firm serving the insurance and reinsurance industries, a newly released report indicates that earthquake insurance is becoming increasingly rare. The main reason for the apparent downward trend is that consumers and businesses regard the additional coverage as more of a financial burden than a sufficiently necessary protection.

A dire prediction from the risk management report estimates that in the event of a devastating 7.9 magnitude quake striking the Bay area, potential damage could possibly reach a mind-boggling $200 billion. Worse yet, much of the damage caused as a result of the earthquake would not be covered by the state’s insurance companies, since most homeowners insurance policies don’t reimburse for property loss due to earthquakes. If you want the added protection, it must be purchased separately as supplemental coverage for existing homeowner policies. Without it, you could find yourself financially vulnerable to the devastating aftermath of the lack of such coverage.

The increasing rarity of earthquake insurance is evident throughout the state, as the additional coverage has dropped more than 50 percent over the past 25 years. Currently, the survey shows that only about 10 percent of California’s households have the insurance, and that total may continue to gradually decline over the next few years as more and more residents and businesses feel they can do without it. But, this belief could lead to enormous hardship should the Bay area be hit by a major earthquake and the region lacks the financial security and support the insurance coverage offers.

While California property insurers are required by state law to provide the optional coverage, homeowners are not forced to purchase it. Unfortunately, at present, it appears consumers are choosing to pass on the opportunity. In some cases, it is a result of the mistaken belief by the homeowner than his regular insurance policy covers him for any damage caused during or after an earthquake. The reality is – it does not.

Typically, an optional earthquake insurance policy covers any damage to structures, their contents, and assorted other expenses incurred, such as lodging and meals should your residence be “red tagged” as uninhabitable. As for businesses, the coverage can provide some well-needed financial assistance and compensation for any interruption in normal operations that may be halted as a result of an earthquake.

The final decision is up to the homeowner and the business owner, but the added coverage of an earthquake insurance policy can keep your investment protected from the unexpected wrath of Mother Nature.

Don’t just guess at what your policy covers…find out…and make sure you’re getting the best rate on your homeowners insurance. Why not get a free homeowners insurance quote today.

Do you currently have earthquake insurance? If not, do you plan on getting some? Feel free to share your thoughts in the comments section below.