Early last month my then-12-year-old daughter Nina had her nerves frayed by three magnitude 4.5 earthquakes that struck Southern California over a two-day period.
Although the three temblors were extremely modest by Southern California standards, the epicenters were roughly five miles from our home — which meant we were among those who experienced the brunt of the shaking. Believe it or not, one of the shakers that happened shortly after I had turned in for the evening was so sharp that, for a brief moment, I thought it was going to toss me off the bed.
Thankfully, the quakes left no damage to our two-story home. Nevertheless, Nina was constantly on edge, afraid that our house couldn’t withstand the shaking. As such, I tried my best to assure her that, unlike brick buildings, wood frame homes like ours that make up the vast majority of residences in Southern California are extremely flexible and, therefore, able to withstand most earthquakes with relatively minimal damage.
That’s not to say that during a major temblor lots of pictures can’t fall off the walls, cupboards won’t be emptied of their contents, and windows won’t crack or break — but the odds of our wood-frame house being turned into a terrifying heap of splintered lumber and shattered glass are long.
Earthquakes Can Happen Almost Anywhere
Of course, earthquakes in America aren’t limited to the western United States; there have been some significant temblors east of the Rockies too.
Last year, an earthquake registering 5.6 hit central Oklahoma. More notably, between 1811 and 1812, four major earthquakes of magnitude 7.0 or greater struck the region surrounding New Madrid, Missouri. The shocks were so powerful that they were felt as far away as Ohio and Virginia.
The East Coast isn’t immune from the occasional seism either.
In 1886 a magnitude 7.3 quake struck Charleston, South Carolina, and Cape Ann, Massachusetts, experienced a strong temblor measuring 6.0 in 1755. More recently, a magnitude 5.8 shaker struck Mineral, Virginia in 2011. Other significant modern-day earthquakes in the eastern US measuring over 5.0 have struck Plattsburgh, New York, in 2002 and Pymatuning, Pennsylvania, in 1998.
In fact, according to the US Geological Survey, 23 states had at least one earthquake in 2011 big enough to be felt by someone.
The Pros and Cons of Earthquake Insurance
The reason I bring this up is because my homeowners insurance policy needs to be renewed this month; the basic premium is slightly over $600. As part of the process, the insurance company is also offering me the opportunity to buy earthquake insurance for an additional premium of $526.
So, is earthquake insurance worth it? That’s hard to say because there are so many variables to consider, and earthquake insurance policies and rules vary on a state-by-state basis.
In my case, the earthquake insurance policy being offered by the California Earthquake Authority would cover $304,638 to rebuild my home. Unfortunately, there is a 15% deductible on the structure’s replacement cost, which means the first $45,695 in damages will come out of my pocket before I see a penny from the insurance company.
Here’s the rub: Short of my home being completely destroyed, it’s fairly unlikely I’d encounter damages far above the policy’s large deductible. That hunch is backed up in a CBS MoneyWatch article by Kathy Kristof who wrote:
Total loss claims from fires are common, but they’re rare with earthquakes. California’s two biggest quakes — the 1989 Loma Prieta quake and the 1994 Northridge quake — give some clues. Roughly 45,000 claims were submitted after the Loma Pieta quake, and the average value (not adjusted for inflation) was between $9,000 and $18,000. (If you figure a 3% inflation rate, the $18,000 claim would be worth just over $36,000 today.) The Northridge quake generated 195,000 claims with an average value of $35,000 — about $60,500 in inflation-adjusted dollars, assuming a 3% average inflation rate.
It also doesn’t help that the earthquake insurance would only cover $5000 worth of damage to the contents of my home. That’s almost ludicrous.
If my home was older, or built of brick or masonry construction, I would probably buy it, but it’s not. I have a relatively new wood-frame home — built just 15 years ago — that is bolted to the foundation and constructed to the latest earthquake-resistant standards.
That’s why, after carefully weighing all the risks, I’ve decided to take my chances and decline the earthquake insurance because, for me, the potential benefits simply don’t justify the cost of the coverage.
Photo Credit: California Watch