Is Earthquake Insurance Worth It?
Each year, there are roughly 4,000 recorded earthquakes in Canada and experts in BC warn that in the next 50 years, there is a 30% chance of a significant earthquake in British Columbia.
Now knowing these statistics, this may be the perfect time to review your insurance policy to see if it includes earthquake insurance.
Earthquake coverage typically does not form part of most standard home insurance policies. It can however be purchased separately, assuming your property is eligible for the coverage. It will carry with it an additional premium amount and is always subject to a higher (separate) deductible than coverage for other perils included in your policy.
As we have seen in similar disasters in other parts of the world, Earthquakes can leave entire cities paralyzed and many homes completely destroyed. In the next few sections, we will take a closer look at Earthquake coverage, how much it roughly costs to purchase, and whether it is worth purchasing for your home or condo.
What is earthquake insurance and why is it important?
In its simplest description, Earthquake insurance covers the loss or damage caused to a property as well as its contents, as a result of the shaking of the earth. In most policies, if the shaking of the earth results in a fire, only the resulting loss or damage from the fire would be covered under an ordinary home insurance policy. But if your home is damaged as a result of the earth-shaking, not a fire, your standard home insurance policy would not cover the resulting damage unless you have purchased the earthquake coverage add-on.
While Earthquakes do not occur nearly as frequently as other natural disasters, they can cause disastrous damage to homes, possessions and other buildings. They can happen at any time and can leave people completely stranded, without any of their possessions or even a place to live. Having Earthquake insurance provides you with peace of mind knowing that should a major quake hit the Lower Mainland, your home and your belongings are covered.
Earthquakes around the Globe and the impact on BC
To demonstrate the potential impact Earthquakes can have, we have included a table outlining the top 10 costliest Earthquakes (and Tsunamis) by Insured Losses, between 1980 and 2020:
|Rank||Date||Location||Losses (in USD millions) Overall||Fatalities|
|1||March 11, 2011||Japan: Aomori, Chiba, Fukushima, Ibaraki, Iwate, Miyagi, Tochigi, Tokyo, Yamagata. Includes tsunami.||$210,000||15,880|
|2||Feb 22, 2011||New Zealand: Canterbury, Christchurch, Lyttelton||$24,000||185|
|3||January 17, 1994||USA (CA): Northridge, Los Angeles, San Fernando Valley, Ventura, Orange||$44,000||61|
|4||February 27, 2010||Chile: Concepcion, Metropolitana, Rancagua, Talca, Temuco, Valparaiso. Includes tsunami.||$30,000||520|
|5||September 4, 2010||New Zealand: Canterbury, Christchurch, Avonside, Omihi, Timaru, Kaiapoi, Lyttelton||$10,000||0|
|6||April 14-16, 2016||Japan: Kumamoto, Aso, Chuo Ward, Mashiki, Minamiaso, Oita, Miyazaki, Fukuoka, Yamaguchi||$32,000||205|
|7||January 17, 1995||Japan: Hyogo, Kobe, Osaka, Kyoto||$100,000||6,430|
|8||November 13, 2016||New Zealand: Canterbury, Kaikoura, Waiau, Wellington, Marlborough, Picton||$3,900||2|
|9||June 13, 2011||New Zealand: Canterbury, Christchurch, Lyttelton||$2,700||1|
|10||September 19, 2017||Mexico: Puebla, Morelos, Greater Mexico City||$6,000||369|
As a result of these global disasters, the Insurance Bureau of Canada commissioned an Earthquake study. One of the results of the study estimated that the overall cost, following a 9.0-magnitude earthquake in BC was nearly $75 billion. The full report also quantified the number of damage Canadians could expect if faced with a significant earthquake. It demonstrated that a major earthquake will have a significant economic impact regionally as well as a domino effect on the entire Canadian economy.
The Cost of Earthquake Insurance— Is It Worth Having?
Over the years, the cost of earthquake coverage has increased substantially. Depending on the area within BC that you live in, the additional premium directly attributable to the earthquake peril can make up as much as 25-35% of your overall premium. Multiply that amount by the number of years you own your home or condo for, and you are paying a significant amount of money for something that may never happen in your lifetime. If the Earthquake coverage component costs $300 a year to have and one lives in their home or condo for 40 years, that’s $12,000.
But, if we were to experience a disastrous earthquake in our lifetime, that $12,000 spent would be worth every penny and provide you with financial certainty during the most challenging time of your life. And, given that we do live in a part of the world that is prone to Earthquakes—and experts telling us we’re overdue for ‘a big one’, it better to be safe than sorry and make an Earthquake Coverage part of your Residential Insurance policy.