Most home insurance policies do not provide protection against the damages that earthquakes can cause. For homeowners in areas that are prone to earthquakes, and even those with a history of quakes—no matter how rare—should consider the benefits of earthquake insurance.
With the protection of a traditional home insurance policy, the foundation damage and wall damage caused by an earthquake, as well as the value of any contents that are destroyed, would likely not be covered. Instead, an insured would have to pay out of pocket to repair and replace anything damaged. Earthquake insurance through a separate policy or as a rider on your home policy, offers you an easy way to provide an affordable layer of insurance protection that only comes into play when an earthquake strikes.
As with other insurance policies earthquake insurance has an annual deductible that you must pay before damages will be covered. Deductibles may be based on a percentage of the policy’s total limits, which can be a substantial amount and one that insureds must prepare for. Additionally, the policy will have limits that determine the maximum your policy will pay. Just as they are with traditional home insurance, earthquake policy limits should be based on the cost to rebuild your home and not on the sale price or estimated value. Premium costs for your policy will be determined by evaluating many factors including your home’s location, date of construction and the construction materials.
Having earthquake insurance does not mitigate the need for flood insurance. For example, if an earthquake causes a tidal wave, which, in turn, creates flood conditions, that damage would only be covered by a flood insurance policy.
There's something you should know: Flood losses are not covered by your homeowners insurance policy.
Floodwaters have the power to damage not only your home and sense of security, but also your financial future. How can you protect your most important investment in case of flooding?
Option 1: Hope that you'll receive Federal disaster relief if a flood hits.
Many people wrongly believe that the U.S. government will take care of all their financial needs if they suffer damage due to flooding. The truth is that Federal disaster assistance is only available if the President formally declares a disaster. Even if you do get disaster assistance, it's often a loan you have to repay, with interest, in addition to your mortgage loan that you still owe on the damaged property.
Most importantly, you must consider the fact that if your home is flooded and disaster assistance isn't offered, you'll have to shoulder the massive damage costs alone. The bottom line is that if you're looking for secure protection from financial loss due to flood damage, Federal disaster assistance is not the answer.
Option 2: Buy flood insurance and stay protected no matter what.
When disaster strikes, flood insurance policyholder claims are paid even if a disaster is not Federally declared. Flood insurance means you'll be reimbursed for all your covered losses. And unlike Federal aid, it never has to be repaid.
In general, a policy does not take effect until 30 days after you purchase flood insurance. So, if the weather forecast announces a flood alert for your area and you go to purchase coverage, it's already too late. You will not be insured if you buy a policy a few days before a flood.