You purchase home insurance to protect what is likely one of your largest investments. However, most homeowner's insurance policies do not protect against major natural disasters like earthquakes or floods. If you are considering adding excess earthquake insurance to your policy, these three questions can help you make an informed decision.
1. Do You live in a Seismically Active Area?
There is no point in adding coverage to your homeowner's policy if you will never use it, which may be why, even in seismically active California, only 12% of homeowners have special earthquake coverage. Since nearly 90% of Americans live in an area where earthquakes are likely to occur, you may be underestimating the likelihood of a natural disaster.
2. Could You Replace Your Home if it Was Destroyed?
This is a major consideration, especially if you answered yes to the first question. Rising construction costs may make rebuilding more expensive than you expect, especially if there is a supply scarcity brought on by the quake.
3. Where Would You Live if an Earthquake Damaged Your Home?
Moving into a hotel or rental for several months can add significantly to your expenses. For many families, that single expense might use up any extra income or even deplete savings. Many earthquake policies will pay for temporary living arrangements if damage makes your home unlivable so you don't have to worry about the extra expense.
Earthquake insurance provides support after what can be a devastating experience. Answering a few questions can help you determine if your home needs the added protection.