Until the ground started to shake earlier this month, there were probably few New Jersey residents thinking about the possibility that an earthquake could damage their home.
Now, it’s a topic likely on the minds of many, even though the 4.8 magnitude quake on April 5 and dozens of aftershocks appear to have caused very minimal damage statewide.
MORE: N.J. earthquake: How to check your house for damage
The first thing those who got some cracks in their walls or broken floors should know is standard homeowners’ insurance does not cover earthquake damage in New Jersey or anywhere else, according to the U.S. Federal Emergency Management Agency.
That’s news to many homeowners, said Mark Friedlander, director of corporate communications for the Insurance Information Institute.
“Many homeowners assume an earthquake is part of a standard homeowners’ policy,” Friedlander said.
Earthquake insurance is a whole separate purchase, and it’s not cheap. Friedlander said annual premiums in the U.S. range from approximately $1,000 in lower-risk areas such as New Jersey, to $5,000 in California, location of the volatile San Andreas Fault.
Homeowners should also consider the deductible on earthquake insurance. That’s the amount of damage repairs a homeowner would have to pay for themselves before insurance kicks in.
Deductibles on earthquake insurance typically range from 10% to 20% of a homeowners’ dwelling coverage limit, Friedlander said. The dwelling coverage limit is defined as the cost of rebuilding a property if it is destroyed. It is included in the declarations section of any policy.
“If impacted by an earthquake, most homes would experience damage that does not exceed their insurance deductibles, meaning that even with insurance’s high rates, insured homeowners would not receive money from their policy to address the damage,” FEMA said on its website.
This could be a factor in why many, even in areas more prone to earthquakes, decline earthquake insurance. Only 10% of California residents have earthquake insurance, despite living in a state that experiences 90% of the nation’s earthquakes, FEMA said in 2022.
The federal agency cited “skyrocketing” insurance premiums in explaining how earthquake coverage in Missouri in the vicinity of the New Madrid fault declined from 60% of residents in 2000 to 11.4% as of 2021. That’s a location considered by many researchers as potentially more dangerous than the better-known San Andreas Fault.
New Jersey is a relatively small player in the earthquake insurance market. As of 2023, there were $250 million in direct premiums written for earthquake coverage in New Jersey, Connecticut and New York, less than 5% of the overall U.S. market,according to A.M. Best.
Friedlander said earthquakes that cause significant damage generally have a magnitude of 5.0 or greater.
Last week’s quake in New Jersey, which registered at 4.8, was the state’s strongest in 240 years.
“A stronger earthquake is going to cause damage. That’s a given,” Friedlander said.
The age of a building is a factor to consider in assessing whether to purchase earthquake insurance. Last Friday’s earthquake damaged Taylor’s Mill, a 264-year-old building in Readington used to supply grain during the Revolutionary War.
“If you have an older home, it’s not going to withstand an earthquake as well as newer construction,” Friedlander said.
Friedlander’s organization, the Insurance Information Institute, is a New York City-based nonprofit whose stated mission is to improve public understanding of insurance.
It recommends that everyone purchases flood insurance — approximately 90% of natural disasters involve flooding, Friedlander said. But, the group is neutral on earthquake insurance.
“You should ask, what are the risks I have? How close am I to a fault line? What kind of damage could I potentially see? It’s certainly worth having the discussion with your insurance agent,” Friedlander said.
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Rob Jennings may be reached at rjennings@njadvancemedia.com.
