Given that most of the strongest earthquakes to occur in the U.S. have largely been in California, one might expect that residents often purchase earthquake coverage to go along with their home insurance policies. But according to a recent survey, a relatively small number of people in parts of the Golden State have this type of protection.
Just 5 percent of individuals living in Napa county have residential earthquake insurance, according to a recent poll performed by Aon Benfield. Meanwhile, about 1 in 10 people in surrounding counties have this type of coverage, on average.
These findings were part of Aon Benfield's latest report on natural disaster perils that occurred in August throughout the world. On Aug. 24, a temblor rocked the San Francisco area. With a magnitude of 6.0, it was the strongest earthquake to hit the Bay Area in a quarter of a century, causing nearly 260 injuries and damaging dozens of properties, including businesses, residences, and local infrastructure.
Steve Bowen, associate director and meteorologist for Aon Benfield, indicated that typically during the closing months of summer, the most common catastrophe is hurricanes. That wasn't the case this time around.
"Earthquakes were the primary focus during the month of August, especially following the magnitude-6.0 event in Northern California's Bay Area," said Bowen. "Residential earthquake insurance penetration rates have gradually lowered in California during the past two decades from 33 percent in 1996 to roughly 10 percent today, and the Aug. 24 Napa County event serves as a reminder of the unpredictability and costly impacts of the peril."
1994 quake still U.S.' costliest
He added that catastrophe modeling is a key component of analyzing the risks involved with living or operating in a region in which earthquake activity has been known to occur. He also stated that based on preliminary data, the costs of damage from this latest earthquake will likely fall well short of the one that occurred in Northridge 20 years ago and the one in Loma Prieta before that in 1989. The Northridge quake caused an estimated $24 billion in insured losses after accounting for inflation, the Insurance Institute reported, versus 1.8 billion for Loma Prieta.
Other substantial earthquakes that took place this August were reported in Peru, Ecuador, Algeria, South Africa, and Iran, Aon Benfield noted in its analysis.
Many people are under the impression that, similar to flooding, a basic home insurance plan provides for earthquake damage. In reality, this usually has to be purchased separately.