About earthquake insurance
Missouri is the third largest market for earthquake insurance among the states, exceeded only by California and Washington. A study by the U.S. Geological Survey estimates the probability of a magnitude 7.5 or greater earthquake in the New Madrid zone over the next 50 years is 7-10 percent. The probability of an earthquake exceeding magnitude 6 over the same period is 25-40 percent. A joint assessment by the Mid-America Earthquake Center of the University of Illinois and the Federal Emergency Management Agency predicts the New Madrid event could constitute the highest total economic loss of any natural disaster in U.S. history. Earthquake coverage is not included on most homeowners insurance policies. It must be purchased as separate coverage, called an "endorsement" or as a stand-alone policy. This type of insurance requires that the earthquake is the direct cause of damage to the property. Natural disasters can, in many instances, trigger other events that may also damage property. One example is earthquakes causing bodies of water to produce waves, resulting in flooding.
What is covered
Earthquake coverage pays for damage caused by the shaking and cracking that can damage homes and other structures. Other damage indirectly caused by earthquakes may be covered by other insurance. Fire and water damage due to burst gas and water pipes - even though it may be caused by a quake - is generally covered by the standard portion of the homeowners policy. Earthquake damage to vehicles is covered by the comprehensive portion of auto policies.
Pricing and availability
Earthquake insurance usually features two high deductibles: Rather than a dollar amount, it's a percentage of the cost of rebuilding the home and a separate deductible for the home's contents. Deductibles of 10-15 percent are common. For example, with a 15 percent deductible, the owner of a $200,000 home could expect to pay up to $30,000 in deductibles for damage to the dwelling before receiving any benefit from their earthquake insurance policy.
The material used to build the home can also determine premiums or whether your home is even insurable. For instance, premiums may be lower for wood-frame homes, which withstand tremors better than homes made of masonry such as brick and stone. Single-story homes may also have lower premiums as they tend to sustain less damage from an earthquake. Age of the home can also affect premiums. Some insurers will not offer earthquake insurance for masonry homes.
DCI has recognized the significance of informing consumers about insurers that offer earthquake coverage, and reasons for considering why they should obtain insurance for damages caused by a catastrophic event. With significant portions of Missouri property owners exposed to the New Madrid Earthquake Zone, DCI finds it essential to provide consumers with updated information regarding from whom and where earthquake insurance is available. For more information regarding the Missouri earthquake insurance market, please review the Earthquake Shopping Guide and the Earthquake Report. For more information on obtaining or maintaining coverage speak with your agent.