Earthquake Insurance in Texas
In Texas, earthquakes induced by fluid withdrawal, oil production, or fault systems are common. Sadly, it is almost impossible to tell when these shocks will occur. Hence, earthquake insurance is important for Texas homeowners, renters, and tenants.
Depending on the size, earthquakes can damage buildings as well as destroy personal properties within such buildings. Apart from the financial expenses incurred from the earthquake damage, homeowners and tenants may also be forced to stay in hotels pending the time their homes are restored. Earthquakes equally affect the ability of companies to produce or make sufficient profit. Commercial buildings often lose some or all of their inventory to ground tremors. However, with earthquake insurance in place, policyholders are better prepared against financial losses caused by earthquakes.
The Earthquake Hazards Reduction Act under the US Constitution recognizes the risk of earthquakes in the 50 states. And so, the National Earthquake Hazards Reduction Program was set up to provide “affordable earthquake insurance.” A standard homeowner or commercial business policy does not cover earthquake-induced damages. As such, getting earthquake insurance is important, especially for residents living in places with a history of high seismic activities.
What is Considered Earthquake Insurance?
Earthquake insurance is an insurance policy that protects you from losses and damages suffered due to an earthquake. Your policy provider may offer earthquake coverage as separate insurance or include it as an option within your standard homeowners insurance policy. Once purchased, the insurance company will bear the financial burden of replacing or repairing home furnishings destroyed by an earthquake.
Earthquakes caused by movements in the earth's crust often lead to violent ground shaking or mild tremors. According to the US Geological Survey, the impact of an earthquake is determined by its size and intensity. Violent magnitude 7 earthquakes, which are rare, cause major destruction to buildings and public properties. On the other hand, mild earthquakes, within 2.5 and 6, are common and can rupture building walls or destroy some objects inside the houses affected. While earthquake insurance provides coverage for financial expenses suffered during a large-scale tremor, it pays for the cost of repairing damaged items during mild shock.
What is the Purpose of Earthquake Insurance?
Insurance companies created separate earthquake insurance to help policyholders reduce the financial losses incurred by earthquakes. Earthquakes were not common in the past, with the only major disasters occurring in San Francisco (1906), Alaska (1964), and California (1994). However, human activities like hydraulic fracking have increased the number of earthquakes in Texas and other states with oil industries in recent times.
According to a 2017 report by the USGS, victims of earthquakes in the United States spend up to $6 billion in covering losses created by the natural disaster. As earthquake risk increases, individuals need a specialized policy like earthquake insurance to protect themselves against the financial burdens caused by disastrous shaky ground.
What is Earthquake Insurance for?
Earthquake insurance is created for individuals living in earthquake-prone areas. However, anyone can purchase earthquake insurance to prepare themselves for unforeseen losses caused by mild shocks. Earthquake insurance protects high-risk story buildings that are old and susceptible to large-scale quakes felt miles away from the epicenter.
Generally, earthquakes can occur anywhere, but they are prominent in regions with high seismic activities. For instance, counties in West Texas within the Permian Basin like Reeves County, Midland County, and Culberson County are prone to earthquakes caused by oil exploration in the region. The cities of Odessa and Midland, with more than 100,000 residents, are two regions with high seismic activities. Factors such as the closeness of a house to an active earthquake fault and the area's seismic history will determine if earthquake insurance is necessary.
What are the Types of Earthquake Insurance?
Insurance companies often provide three major earthquake coverage plans. You can purchase all coverage plans under one deductible or select a separate deductible for each plan. Here are the types of earthquake insurance plans:
Dwelling Coverage: This separate policy pays up to the coverage limit for damages to your building caused by an earthquake. Other structures like garages, decks, and stairways attached to the insured building are also included under this coverage. Note that the coverage limit is the same as your homeowner insurance which also involves similar deductibles. Dwelling coverage is essential for homeowners and commercial property owners.
Personal Property Coverage: Also known as contents coverage, this coverage pays for earthquake damages to items inside your house. Under this coverage, you can file a claim for replacement or repair of furniture, clothes, electronics, and appliances destroyed or damaged by shocks. Coverage limits in Texas range from $5000 to $200,000.
Loss of Use Coverage: This coverage pays for additional living expenses caused after an earthquake renders a home uninhabitable. In a situation where a large-scale earthquake wrecks your building, loss of use coverage pays for your hotel accommodation and feeding expenses away from home.
Apart from these major coverage plans, your insurance company may offer optional plans such as breakables coverage, emergency repair coverage, and building code coverage. Note that your earthquake insurance policy will not cover damages caused by secondary earthquake hazards like floods and fire.
You can speak to a licensed insurance agent in Texas to help determine the right type of earthquake insurance suitable for you.
Do you Need Earthquake Insurance in Texas?
Yes, it is important to get earthquake insurance in Texas, particularly if you reside in earthquake-prone areas within the state, so you stay protected against financial damages of unknown proportions resulting from earthquakes.
Why Do you Need Earthquake Insurance?
Earthquake insurance in Texas is becoming increasingly important as the number of destructive earthquakes in the state increases. According to a USGS report in 2015, Texas and 47 other states in the US have a high likelihood of witnessing damaging earthquakes within the next 50 years. The report also showed that 3.8% of the Texas population is exposed to potentially damaging ground shaking. As such, securing yourself and your building against financial damages caused by the ground shaking disaster cannot be overemphasized.
Texas oil and gas activities have also multiplied the risk of earthquake occurrence in the state. The Railroad Commission of Texas reported several high magnitude earthquakes related to hydraulic cracking between 2020 and 2021. These same tremors often leave cracks in building walls or completely destroy attached structures.
Every part of Texas is at risk of experiencing mild earthquakes. According to the TexNet Earthquake Catalog, more than 300 magnitudes>3.0 earthquakes occurred in Texas between 2020 and 2022. Cities like San Antonio, Pecos, Midland, Odessa, and Amarillo were the most affected regions. With these areas affected, other surrounding communities may eventually feel the impact of these tremors.
Getting earthquake insurance in Texas is even more important if you have a high-rise building, old building, structures made with old building codes, or breakables within the building. The impact of a small-scale shock in Texas may damage any of these high-risk structures. A licensed insurer in Texas can help you determine the best earthquake insurance policy suitable for you.
How Much Earthquake Insurance Do you Need?
A homeowner, tenant, or renter in Texas should purchase earthquake coverage that can cover the cost of repairing, rebuilding, or replacing their buildings and properties in the event of an earthquake. The right amount of earthquake insurance needed depends on the type of building, location, cost of rebuilding, and properties within the building. For instance, residents living in retrofitted buildings located in low-risk regions may not need to spend much on earthquake insurance. Business owners with commercial properties or homeowners may need to focus mainly on dwelling coverage policies. On the other hand, tenants may focus more on content coverage to protect their properties against damage by ground shaking tremors.
What Earthquake Insurance Coverage Do you Need in Texas?
Homeowners, tenants, and renters have different earthquake coverage needs. Homeowners may purchase earthquake dwelling coverage, contents coverage, and loss of use coverage subject to a deductible. This way, both the building and its contents are covered under one policy. While tenants are concerned about their personal belongings in the building and may purchase only personal property coverage, renters may focus on the building alone and purchase dwelling coverage. Business owners need commercial earthquake insurance to protect their properties from earthquake damages.
Is Earthquake Insurance Required by Law in Texas?
Texas law does not mandate the purchase of earthquake insurance. However, getting earthquake insurance helps minimize future financial costs resulting from quakes. Many standard insurance policies do not include earthquake damages. When destructive tremors occur, you will have to bear the financial burden resulting from such damage out of your pocket.
How Do I Know if Earthquake Insurance is Required?
You can find out if earthquake insurance is required in Texas by law by contacting a state-licensed insurance agent to know the state’s law on earthquake insurance. Alternatively, you can look up the Texas Insurance Code to be certain about the legal requirements of earthquake insurance.
How Does Earthquake Insurance Work in Texas?
Earthquake insurance is similar to any other insurance policy, with the difference being that it covers only financial losses caused by earthquakes. Private insurance companies regulated by the Texas Department of Insurance (TDI) offer earthquake coverage to residents. An individual paying for earthquake coverage from an insurance company is the policyholder.
Insurers offering earthquake policies often conduct risk assessments based on your location and your building’s age and type to determine the insurance premium you will pay. The deductible rate and coverage limit are provided under the earthquake insurance contract. Once you agree to the terms of the earthquake coverage, you will be required to pay the annual insurance premium, which is usually between $500 and $5,000. Generally, your premium may be higher than usual if you live in areas with high seismic activities. Some insurers allow monthly payments, while others require full payments to kickstart the policy.
When your earthquake policy is active, you are eligible to file a claim if an earthquake destroys your building. In response, the insurer processes your claim and pays for the financial losses after approval. The entire process is straightforward and easy if you engage the services of a professional insurance agent in Texas.
What Does Earthquake Insurance Cover?
Earthquake insurance covers shaky-ground damages on a building, structures attached to the building, belongings/breakables inside the building, and additional living expenses incurred if the building was totally destroyed. The coverage will be limited if you purchase a standalone earthquake insurance policy:
Earthquake insurance for dwelling coverage only pays for earthquake damages to the building
Earthquake insurance for property coverage only pays for earthquake damages to items inside your house.
Earthquake insurance for loss of use coverage only bears the cost of staying and feeding away from home in the event that the house is declared uninhabitable due to earthquakes.
Consulting with a licensed insurance agent in Texas will keep you informed on what your earthquake policy covers.
What is Earthquake Insurance Good for?
Basically, earthquake insurance minimizes the financial risk of ground tremors. The policy helps individuals living in earthquake-prone regions to prepare financially for future uncertainties.
Earthquake insurance is good for managing policyholders' cash flow in unpredictable times. For example, predicting when destructive tremors will occur in cities like San Antonio or Midland is impossible. In most cases, policyholders may not be financially buoyant at the time of the disaster, but with earthquake insurance, the risk of out-of-pocket payment is reduced.
Earthquake insurance gives policyholders an edge when applying for disaster loans. The policy serves as proof of well-managed financial resources as it also complies with legal requirements by other governmental agencies. In general, earthquake insurance reduces social burdens that often arise after the disaster. After a disaster, the rate of displaced persons looking for shelter and food will reduce since the policy covers additional living expenses of policyholders.
What Does a Typical Earthquake Insurance Include?
A typical earthquake insurance should include the details of an earthquake insurance coverage, the policy limit, premium, and deductible. Your earthquake policy may cover only the building, personal belongings within the building, or additional expenses if the building is totally destroyed by a large-scale tremor. Alternatively, you can include the three types of earthquake policies into one plan. Other types of earthquake insurance are breakable coverage and building code upgrade coverage. Note that earthquake insurance only covers some damages or losses done by earthquakes. For instance, your earthquake coverage includes payment for repairing earthquake-induced cracks on your building walls or replacing destroyed belongings within the building.
The earthquake insurance policy document also includes the coverage limit and earthquake deductible you select for each plan. The coverage limit is the maximum amount an insurer will pay for a claim, while deductible is the payment you must make toward an insured loss. Note that the type of earthquake insurance policy, limit, and deductible you choose will determine the premium you must pay to the insurer monthly or yearly.
Understanding what your earthquake insurance includes will help you avoid disagreements when filing a claim with your insurer. It is best to discuss this with a professional insurance agent in Texas.
Who is Covered by Earthquake Insurance?
Earthquake insurance covers the person who owns the insurance policy. Also known as the policyholder, such an individual may be a renter, tenant, homeowner, or business owner.
What Types of Items Does Earthquake Insurance Cover?
The type of earthquake insurance policy you purchase will determine the items covered. The building walls and extended structures are under the dwelling coverage policy. This means that under your policy you can file a claim for earthquake damages to extended structures such as:
garages,
decks,
porches, or
stairways.
Items covered under Texas earthquake policy include personal belongings:
furniture,
TVs,
bikes,
pieces of jewelry, and
other home electronics.
China plates, glassware, pottery items, and porcelain that are easily destroyed by mild shocks are covered under a separate policy known as breakable coverage. Under the loss of use coverage, your insurer is required to bear the financial burden of your hotel fees and feeding when an earthquake destroys your home.
Does Earthquake Insurance Cover - TX FAQ
Does Earthquake Insurance Cover Landslides?
No. Earthquake insurance does not cover landslides and other disasters considered as ‘movement of the earth.’ Most insurance companies consider it unnecessary since they are very rare. Homeowners or commercial properties that need to insure their building from landslides can purchase difference in conditions (DIC) coverage, which is quite expensive. Standard homeowner insurance does not cover property damaged by landslides or mudflows.
Does Earthquake Insurance Cover Pools?
No, pools are not covered under earthquake insurance since they are insured under standard homeowners insurance policy. However, insurance companies do not pay claims for pools damaged by earthquakes. Discuss with a knowledgeable state-licensed insurance agent to find out how in-ground pools or above-ground pools can be insured against surface ruptures.
Does Earthquake Insurance Cover Sinkholes?
No. Earthquake insurance does not include payment for damages caused by sinkholes. Homeowners and renters may need to buy a separate sinkhole insurance policy or add sinkhole insurance coverage to their existing homeowners insurance policy.
Does Earthquake Insurance Cover Damage?
Yes. Earthquake insurance covers some damages and losses caused by earthquakes. For instance, an insurance company will pay for wall cracks damaged by surface tremors. Furniture and other insured belongings within the building destroyed by the tremor are also covered under earthquake insurance. Likewise, the insurer is responsible for extended structures like stairways or porches ruptured by the tremor. However, if an earthquake-induced flood or fire causes the damage, an insurer may reject the claim. Earthquake insurance does not cover damages to a car, pool, or landscape.
What is not Covered by Earthquake Insurance in Texas?
Earthquake insurance does not cover damages caused by indirect earthquake damage or earthquake hazards like tsunamis, liquefaction, rockfalls, and fire. Also, properties destroyed by earthquakes but covered by a separate policy are not covered under earthquake insurance. For example, a comprehensive auto insurance policy covers a car damaged by a tremor.
What Does Earthquake Insurance Typically Exclude?
Earthquake insurance policies exclude damages done to items such as:
Overhangs and other secondary coverings on a building
Structures on land like gardens, trees, shrubs, or landscaping repairs
Electrical problems such as wiring and cable repairs
Personal belongings not inside the insured building
Vehicles, aircraft, or watercraft
Art decorations
Tenant properties
Properties damaged by fire or water
Water supply systems underground, including wells and sprinkler systems
Is There a Waiting Period for Earthquake Insurance in Texas?
Yes. Insurance companies often wait between 30 and 60 days after recent ground-shaking events before writing new earthquake policies for new clients. However, if you are under an earthquake policy before the disaster, you can call your insurer after 72 hours to file a claim. According to the National Association of Insurance Commissioners (NAIC), the three-day waiting period is to assess all damages caused by the earthquake and subsequent aftershocks. Aftershocks, which have lesser impacts than the mainshock, can last for weeks or months. You may file your first claim after 72 hours and file another if multiple aftershocks cause additional damages. It is advisable to speak with a professional insurance agent at the appropriate time to file claims.
Who Can Get Earthquake Insurance in Texas?
Earthquake insurance in Texas is available to all Texas residents: homeowners, renters, and tenants using buildings for residential or commercial purposes. This insurance policy is even more important for individuals living in areas with high seismic activity, as shown in the latest US Geological Survey map.
Who Qualifies for Earthquake Insurance?
Individuals with proof of living and working in Texas qualify for earthquake insurance in Texas. Business owners with commercial properties in Texas can also purchase earthquake coverage. The insurance company will assess the building and its location to determine the earthquake risk level. Generally, persons or organizations residing or operating in low-risk buildings in areas with no risk of ground tremors may not need earthquake insurance. Consider discussing with a licensed Texas insurance agent to determine whether you qualify for earthquake insurance.
Who Needs Earthquake Insurance?
Everyone seeking to protect themselves, their buildings, and belongings against quake disasters needs an earthquake insurance plan. Individuals residing in high-rise buildings and renters with structures situated in earthquake-prone areas also need earthquake coverage. The need for earthquake policy in Texas depends mainly on the location. Residents and business owners living in the counties of Reeves, Culberson, and Martin may need earthquake policy the most since they are affected mainly by surface tremors.
Who Should Get Earthquake Insurance?
An individual who owns a property or lives in a rented apartment in an earthquake prone area of Texas should get earthquake insurance. Corporate organizations and persons using their buildings for commercial purposes should also purchase earthquake coverage to avoid spending business funds after a disaster.
