The Pros and Cons of Earthquake Insurance – What You Need to Know


If you don’t live on the West coast, you probably shouldn’t invest too much of your time worrying about an earthquake. If you do, however, it’s definitely something you should view as a possibility.

However, even with the recent increase in public knowledge, the Californian Earthquake Authority has found that only 10% of Californians have actually purchased earthquake insurance.

That leaves a sky-high 90% of individuals without coverage. And if you own investment properties such as MUBs or HOAs, you’re opening yourself up to a whole new world of liability. Before investing in earthquake insurance, however, it’s worth doing your research.

The Pros of Earthquake Insurance

Acquiring earthquake insurance offers several distinct advantages:

You’ll be covered for repairs

If your property ends up getting damaged by an earthquake, you’ll be glad you had it. Depending on your policy, you’ll likely be covered for repairs or reconstruction of your policy as opposed to losing absolutely everything. When you still have loans to pay on your MUB, this could leave you in a severe situation.

Costs are lower in reduced-risk areas

Earthquakes aren’t just as likely in all areas. As a result, the lower the risk, the lower your monthly premiums. Even if you aren’t in a high-risk area, getting earthquake insurance could afford you some welcome peace of mind.

You might be granted additional living expenses

If your MUB is rendered uninhabitable as a result of an earthquake, your insurance company might grant your tenants additional living expenses to find alternative accommodation while your MUB is rebuilt.

The Cons of Earthquake Insurance

Before buying earthquake insurance for your MUB, it’s worth looking into both sides of the argument.

High-risk means high price

If you live in a state where risk is high — such as California – you’re going to have to pay significantly more for your monthly premiums than if you lived in a low-risk area. It’s up to you to decide whether the high cost is worth the coverage for the risk.

There’s a high deductible to pay

It’s crucial that you read the small print. You might think that making your monthly contributions towards earthquake insurance will get you free coverage, but that’s not often the case. Even with a comprehensive policy, you’ll likely still have a high deductible to pay. This is usually a percentage of your building’s value.

Making the Right Call on Earthquake Insurance

After all is considered, you’re the only one who can decide if earthquake insurance is right for your properties. Although it’s difficult to predict when (and if) an earthquake will occur, that doesn’t mean they won’t. When you take into account the massive damage they can cause, it may well be worth the premiums.

If you’re interested in earthquake insurance, you should contact an experienced insurance broker. We can help you find the option that works best for you — get in touch today.

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