Hear the term “Big One,” and your thoughts might naturally go to California or the Pacific Northwest. However, one of the strongest recorded earthquakes in the lower 48 actually took place in America’s heartland. In late 1811 and early 1812, a series of quakes struck the New Madrid fault, near what is now Memphis, Tennessee. Reaching an estimated 7.7 on the Richter scale, the quakes could be felt as far away as New York City.

A 2009 study by the Mid-America Earthquake Center at the University of Illinois, explained that a quake of that magnitude along the New Madrid fault today, while not highly likely, could damage more than 700,000 buildings in eight states. What’s more, according to the United States Geological Survey, earthquakes threaten more than half the U.S. population.

Nevertheless, Brightway Agents don't get many questions about earthquake coverage. Only about 7% of Americans have it, with sales declining in recent years. Why? Earthquake insurance can be pricey. Premiums range from a few hundred to several hundred dollars. The coverage also has some limitations that make many homeowners decide it’s not worthwhile.

As their advocate, we would never force our customers to buy insurance they don't feel they need, but we do want them to understand their options and what they should expect from their policies. Here are a few things to know when it comes to Earthquake insurance.

Your Homeowners policy doesn’t cover earthquake damage
Standard Homeowners insurance doesn’t cover damage caused by an earthquake. It may, however, cover damage to the home caused by fires following the quake.

Proper Earthquake insurance is available only as a separate policy, or as a Rider (addition) to a standard Homeowners policy. Coverage is provided by private insurers—the company your Homeowners policy is written with might even offer it. In California, policies also are offered through the California Earthquake Authority.

Earthquake coverage has some limitations
Most standard Homeowners policies can be customized, providing added coverage for anything from detached garages and pools, to personal items such as jewelry and firearms.

Earthquake insurance would cover the main structure of the home. But, it may not cover additional buildings, and may have only limited coverage for personal items. It also would likely provide less “loss of use,” coverage than a Homeowners policy. This means you’d have more to pay out-of-pocket for alternate housing while your home is repaired or rebuilt.

Earthquake deductibles tend to be high
Not only can Earthquake insurance be expensive—especially in high-risk areas—but the deductibles are typically higher than those on a standard Homeowners policy. They usually range from 5 to 15% of the policy limit (the “limit” is the maximum amount the insurance company would pay to repair or rebuild the house). 

What does that mean? A standard Homeowners policy deductible is usually a flat dollar amount that you select when you buy the policy—$500 is a common option. So, say a fire does $200,000 worth of damage to your home. You’d pay the $500 deductible toward the repair, and your Homeowners insurance company would pay the remaining $199,500.

As a percentage of the policy limit, an Earthquake deductible means you’d pay a much larger share. Say you have a $200,000 limit with a 15% deductible. You’d pay $30,000 before the insurance payments would even kick in.

Were your home destroyed, this would surely be a welcome tradeoff. But in cases of minor to moderate damage, filing an Earthquake insurance claim may not be worth your while.

Think about earthquake damage mitigation, too
What may be worth your while is ensuring your home is prepared, structurally, to minimize earthquake damage. In California, the California Earthquake Authority offers retrofitting incentives to owners of older homes through a program called Earthquake Brace + Bolt.

The Federal Emergency Management Administration (FEMA) also offers tips to homeowners at https://www.fema.gov/earthquake-safety-home.

An Independent Agent can help you understand if Earthquake insurance is right for you
The bottom line is that Earthquake insurance is a necessity for some homeowners, though perhaps not all.

If you live in an area that’s high risk for earthquakes, such as on or near a fault, I think most agents would recommend the coverage. The likelihood of a quake is high, as is the likelihood of a quake doing severe damage to your home. If you live in a low-to moderate-risk area, the recommendation is less obvious.

An independent insurance agent can help you decide, and compare rates and policies from multiple companies. He or she can help you be confident your policy is up to the task of protecting you financially if the Big One does hit close to home.

If you don’t have a Brightway Agent, click here and enter your zip code to find the closest Agency near you.