After Napa, Missourians Weigh Costs of Earthquake Insurance
Last week, a 6.1 magnitude earthquake in Napa, Calif. ripped through a region where less than 6 percent of homeowners and renters have earthquake insurance.
Could the same thing happen along the New Madrid Fault in southeastern Missouri?
Statewide, about one-third of Missourians are insured against earthquakes. But those who live in the most earthquake-prone areas are much less likely to have coverage.
In a 7.6 magnitude earthquake scenario in the New Madrid seismic zone, the worst damage would be sustained by the six-county New Madrid area in the state’s bootheel region which encompasses Dunklin, Mississippi, New Madrid, Pemiscot, Scott and Stoddard counties. About 26 percent of dwellings in that region have earthquake insurance, according to preliminary 2013 numbers from the Missouri Department of Insurance.
The number of homes with earthquake coverage in that six-county area has steadily declined since the 1990s. In 1998, 61 percent of residences in that same area were covered for earthquakes.
The trend is similar throughout most of the state: In the St. Louis region, 29.6 percent of residences were insured for earthquakes in 2013. Fifteen years ago, 70.8 percent had coverage.
The decline is due in part to rising annual costs of coverage: The 2013 average annual cost of earthquake coverage in Missouri was $60, just $12 more than in 2005.
But in New Madrid County, the average cost of earthquake insurance in 2013 was $333, two-and-a-half times higher than it was just eight years ago.
Missouri Association of Insurance Agents Director Larry Case said increasing annual costs doesn’t tell the full story of why earthquake insurance is unaffordable for many people. Deductibles as high as 25 percent require homeowners to pay thousands of dollars before their coverage kicks in.
“If you have a house that’s insured for $200,000, you have essentially a $50,000 dollar deductible before the insurance company will pay a penny,” Case said.
Case said insurance companies find other ways to weaken coverage. For example, they have separate deductibles for the home and its contents, or the policies exclude damage to masonry. Some insurance agencies do not offer earthquake insurance at all, including Allstate.
“The situation now is, unless there’s a major shake where there are nearly total losses of homes, any minor damage or any damage under most circumstances would not be covered at all because the deductibles are so high,” Case said.
Risk of Another ‘Big One’ is Unclear
Whether the New Madrid Fault will even have a large earthquake in the near future is debatable. The area experiences small tremors regularly, but hasn’t had anything above a 6.3 magnitude since 1895, according to the Missouri Department of Natural Resources.
Historical records show three main earthquake shocks along the New Madrid seismic zone caused major damage in 1811 and 1812, with magnitudes ranging from 7.3 to 7.5. Tremors were felt as far away as Cincinnatti, Ohio, according to the US Geological Survey.
In July, the U.S. Geological Survey released a new round of earthquake hazard maps. It expanded the area along the Missouri bootheel that carries a higher risk for large earthquakes, and it discovered new fault lines in the area.
U.S.G.S. geologist Robert Williams coordinates program research for the Central and Eastern United States. He said the geologic record shows evidence of large earthquakes in the New Madrid area around 1450 and 900 A.D., which heightens the chance that another ‘big one’ will happen, someday. Although geologists generally believe an earthquake with a magnitude larger than 7 can be expected in the area every 500 years or so, Williams says it’s impossible to predict when it would occur.
“There’s still a lot we don’t know about how many faults there are, and how active,” Williams said. “What’s causing them has not been solved.”