There are 2 big exclusions on a Homeowner’s policy that people worry about and wish they had, but typically don’t buy due to price. Those two coverages: earthquake and flood. Earthquake is a coverage that can be added to your Homeowner’s policy when you buy the policy, or every other year at renewal – as required by law to be offered to you. You can also buy a separate policy that only covers damages due to earthquake (although this is very uncommon). Flood insurance is always a separate policy.
How do Earthquake & Flood policies work?
Earthquake policies add the “peril” (or cause of loss) of earthquake to your policy. This means that you now have coverage for earthquake losses up to the same policy limits on your policy. However, the earthquake deductible is separate and much larger, and expressed in terms of a % of your policy’s dwelling coverage. Example: You have $300,000 of Dwelling coverage with a 15% earthquake deductible ($45,000). So, the earthquake damage to your home must be greater than $45,000 before the policy pays. Premiums for Earthquake coverage average about 25-35% on top of your current Homeowner’s premium (that’s a ballpark figure).
Flood Insurance is a stand-alone policy with deductibles like your Homeowner’s deductibles, anywhere from $1,000-$$10,000 – your choice. The Preferred Risk Policy (PRP) includes $250,000 Dwelling coverage and up to $100,000 of Contents coverage. Prices vary for these policies depending on the Flood Zone that you live in, and can range from the PRP rate of about $400 to several thousand dollars, again, depending on the risk of flooding in your area.
Now that you know everything there is to know about earthquake & flood insurance, the question changes to: Do I need to buy earthquake or flood insurance? We sell insurance, so of course our answer is: YES! But consider this: about half of major flooding disasters occur in areas where flood insurance was NOT required by lenders. And as far as earthquakes are concerned, we Californians know that the big one is coming… Please call us with questions or to get a quote, we’ll be here (if the big one hasn’t hit yet).