Should You Add Earthquake Insurance to Your Home Insurance Policy? Deductibles Very High In Most Cases

Reader tells us her wall cracks got worse after Tuesday’s quakes

Tuesday night to Wednesday morning, we had 12 little earthquakes in North Texas.

I definitely felt one, the strongest one said to be a 3.6 on the Richter Scale. My son lives near Palo Alto where they had a fierce 6.0 quake this summer. He usually laughs at my earthquake reports — especially the photo of knocked over lawn furniture saying, “We will rebuild.” But Tuesday night, he wasn’t laughing.

“It’s a rumble,” he agreed, as I tried to describe the sound our Texas quake made as my lights flickered for a second. I was unloading dishes from the dishwasher and had just set down a wine glass. Saw a slight shimmy. The dog was confused. My mother in law was freaking, and I got chills for a minute. My insurance man had been texting me, so I texted him and asked, do we have earthquake coverage?

He is in Lubbock. He thought I was kidding! No, he said, even when he found out about the 3.6. He says he’s never written an earthquake policy in Texas during his life. I turned the question to a few local insurers, including one of our new sponsors, Charles Polansky, a Private Client Advisor at HUB International Personal Insurance here in Dallas. He has been on the phone non-stop with clients since Tuesday.

Nick Klein with HomeTeam Insurance also says his phone has been ringing off the wall, at least 60 clients have contacted him since the rumbles. He thinks a majority will not be adding earthquake insurance, except for those with Travellers and MetLife. Those are two companies that give insureds the option to add earthquake insurance as an endorsement to their existing homeowners policy.

But those deductibles will be high — a minimum of 10 percent.

Nick also writes in California where the earthquake deductibles are 10 percent minimum. Try that on a $3 million dollar home, which is almost an average price.

“The clients we quoted are scared,” said Nick. He also thinks the more and more we have earthquakes in North Texas, the less likely insurance companies will be to add earthquake insurance as optional coverage.

“In Cali, very few companies even offer it,” he says.”People get it from a state pool, like people in hurricane-prone areas.”

I put Charles through the ringer with a Q & A Tuesday night as the earth was rumbling. Jump for the whole thing.

CandysDirt.com: Charles, I understand that Texas does not require earthquake coverage under our laws … could this change? Does it need to?

Charles Polansky:  True, you are not required to buy earthquake coverage under Texas law at this time. Could it be required in the future? Perhaps. Earthquakes are still pretty rare in Texas — and we’ve yet to see one that caused widespread damage to North Texas homeowners. But there could come a time when mortgage companies would require additional earthquake coverage similar to how they require flood insurance for home in vulnerable locations.

CD: You are right — get a couple homes damaged by earthquakes, and those mortgage companies will flock to requiring the coverage. I am hearing of some damage, like a water main break in North Dallas on Hughes Lane. Lots of water was in the street and it was bubbling up. What if a home were damaged by this water, for example, and the water main breaks turn out to be from the earthquake. Are they covered by their insurance policy?

CP: The homeowner would not have coverage unless he/she had purchased earthquake coverage either with a standalone earthquake policy or as an earthquake endorsement by their current insurance carrier — if that carrier offers earthquake insurance.

CD: I’m also hearing of cracks in molding (as in wall molding, knowing you insurers hate that word in general). Covered?

CP: Same as above.

CD: Can you buy an earthquake insurance rider? How much would it cost for a home of say, $500,000?

CP: Let me get back to you with pricing. Most of the carriers we use offer an endorsement adding coverage for earthquakes. All masonry veneer is excluded – brick, stone, and possibly stucco (trying to confirm stucco). Coverage isn’t completely excluded – just the actual brick and/or stone would be. Say the entire house came down due to earthquake.  There is coverage for the dwelling and contents (if purchased) but the homeowner would not be paid for the actual “wall” portion. (Does that make sense?)

CD: No.

CP: So, based on rates we have seen, you could purchase earthquake coverage (dwelling) with Fireman’s Fund for a $500k home for $100 annually (we are trying to confirm there isn’t a minimum annual premium or other surcharges but that’s what the rate tells us). That premium is based off having a 5 percent deductible ($25k in this example).  In a total loss due to earthquake, insured would be paid $500k minus $25k deductible and whatever cost the outer brick/stone veneer is.

CD: Sounds cheap, but huge deductible. OK, if any damage is caused by an earthquake — foundation, plumbing, floor or even antique dish — would the damage be covered?

CP: Of the carriers we do the most business with, only Fireman’s Fund has any kind of built-in earthquake coverage in the homeowner policy. This only covers personal property (antique dishes, for example), though. Therefore, no foundation, plumbing, floor, as in your example.  As mentioned before, Fund will let you add dwelling or dwelling+other structures coverage for additional premium.

CD: What about your swimming pool?

CP: Swimming pools are considered “other structures” therefore it would only be covered if you add coverage for “other structures.”

CD: Good Lord! I hope these mini quakes are anomalies!

Did you get all of your questions answered? If not, comment below and we’ll get Charles to help!