Despite an increase in earthquake-related losses in recent years, fewer than one in ten Midwestern homeowners is prepared to weather it.
According to a survey from the Insurance Information Institute, only 8% of homeowners in the region have earthquake insurance. Without that vital coverage, they may only be entitled to receive payments from tangential losses related to a quake, such as flooding or fire.
The high number of uninsured people is not for lack of trying on insurance agents’ parts, however; a January news report suggests a recent surge in earthquake insurance requests after a flurry of tremors in the area.
What is keeping people from buying a policy is much simpler: cost.
Earthquake insurance is notoriously expensive, with deductibles so high, many feel the cost is simply not worth it. In Kansas, for example, earthquake policies carry a deductible of between 2% and 10%.
However, these numbers are dwarfed in comparison to costs on the West Coast – something agents may want to mention when faced with a cost-based protest from a client.
While Kansas earthquake policies cost about $50 for a property worth $100,000, the average earthquake policy in California costs $676 a year for $175,000. These policies often come with deductibles of between 10% and 15%.
The comparatively low rates result from low earthquake damage in the area, said Chapple Insurance Group owner Chock Chapple.
Chapple believes the low take-up rates will not last, however, as earthquakes become an increasingly common phenomenon in the area. Already, some lending institutions in the Midwest are requiring businesses to secure earthquake insurance before any commercial lending can be transacted.
Chapple believes this growing trend will only continue.
“It’s definitely time to price it out,” he said.
