Low Earthquake Insurance Take-up in Alaska Due to High Cost?

December 11, 2018

With Alaska’s history of earthquakes, you might assume most homeowners have earthquake insurance.

That’s not the case, the Anchorage Daily News reported.

Only about 15 percent of Alaska homeowners buy earthquake insurance, according to an estimate provided by Lori Wing-Heier, director of the state’s Division of Insurance.

“It’s not a great number,” she said.

Lenders do not require earthquake insurance. It also carries a high price tag.

And after a major quake, like the magnitude 7.0 quake that shook southcentral Alaska on Nov. 30, homeowners may find that the damage is less than the deductible on their policy.

Deductibles vary but can be about 20 percent of the value of the dwelling, said Tracey Parrish, owner of Alaska Pacific Insurance Agency.

“If your home is $100,000, people probably don’t have that ($20,000) sitting around,” she said. “And if they do, they may only have $5,000 worth of damage.”

The longer the time span between big earthquakes, the less likely people are to pay a premium for it, Wing-Heier said.

Earthquake insurance typically covers repairs such as cracking and may cover structures such as garages as well, said Janet Ruiz, a West Coast representative for the Insurance Information Institute, a trade group. It also usually insures personal property and may cover other costs.

John Lane and his family moved into an Eagle River home three months ago. Their homeowner’s policy cost $1,300 to $1,500 and he could not justify spending another $1,000 for quake coverage, he said. The deductible would have been around $70,000, he said.

“This was a hard decision, buying a house in a seismic zone, but we just couldn’t afford that,” Lane said.

The family now faces significant repairs. A structural engineer will examine the property.

Owners of damaged home may be able to tap into other resources. Residents of Anchorage, the Matanuska-Susitna Borough and the Kenai Peninsula may be eligible for recovery funding.

Help is often available after natural disasters from the Federal Emergency Management Agency and, for businesses, from the Small Business Administration, Ruiz said.

Homeowners seeking quake insurance now will not be able to find it. A moratorium on selling earthquake policies will be in effect for several weeks, Parrish said.

“It just doesn’t make any insurance sense,” she said. “Because we’re having all these aftershocks.”

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