Volcanic Hazards in Hawaii

Hawaii is home to some of the world's most active volcanoes, creating unique property insurance challenges not found in any other U.S. state.

Active Hawaiian Volcanoes

Big Island (Hawaii Island) Volcanoes

Kilauea

• Status: One of world's most active volcanoes
• Location: Southeast side of Big Island
• Threat: Continuous and unpredictable eruptions
• Recent Activity: Major eruption 2018; ongoing activity 2023-2026
• Impact: Lava flows can destroy everything in their path

Mauna Loa

• Status: World's largest active volcano
• Location: Central Big Island
• Threat: Massive lava flows threaten large areas
• Recent Activity: Erupted November 2022 after 38-year hiatus
• Impact: Lava flows can travel 20+ miles

Hualalai

• Status: Dormant but potentially active
• Location: West side of Big Island
• Threat: Potential threat to Kailua-Kona area
• Last Eruption: 1801
• Impact: Historic flows reached the ocean

Other Islands

Haleakala (Maui)

• Status: Dormant
• Last eruption: Around 1600s
• Lower risk than Big Island volcanoes

Other Islands (Oahu, Kauai, Molokai, Lanai)

• No active volcanoes
• Extinct volcanic systems
• Minimal volcanic risk

Exam Tip: Only the Big Island (Hawaii Island) has active volcanic risk requiring lava zone classifications and affecting property insurance. The other islands have extinct volcanoes and are not classified into lava zones.

Lava Zone Classifications

The U.S. Geological Survey (USGS) classifies the Big Island into 9 lava zones based on volcanic eruption risk:

Lava Zone Definitions

Zone 1 (Highest Risk)

Characteristics:

• Active volcanic vents and rift zones
• Includes areas within and adjacent to Kilauea caldera
• Puna district on Big Island heavily affected
• Lava flows frequent and unpredictable

Insurance Implications:

• Many standard insurers will not write policies in Zone 1
• If coverage available, premiums 200-500% higher than other areas
• Some insurers exclude volcanic damage entirely
• Difficult to obtain mortgage financing (lenders require insurance)

2018 Kilauea Eruption Impact on Zone 1:

• Over 700 structures destroyed
• 14 square miles covered by lava
• Entire subdivisions buried (Leilani Estates, Kapoho)
• $800 million+ in property losses
• Many properties had no insurance coverage

Zone 2 (Very High Risk)

Characteristics:

• Areas adjacent to Zone 1
• 15-25% of area covered by lava less than 750 years old
• Historic lava flows common

Insurance Implications:

• Very difficult to insure
• Premiums 100-300% higher than low-risk zones
• Reduced coverage limits common
• Some insurers require inspection and mitigation

Zones 3-5 (High to Moderate Risk)

Insurance Implications:

• Some standard insurers will write coverage
• Premiums 25-100% higher than Zones 6-9
• May require separate volcanic/earthquake coverage
• Coverage limits may be restricted

Zones 6-9 (Low Risk)

Insurance Implications:

• Standard homeowners coverage available
• Normal premiums
• Most insurers willing to write policies
• Similar to other Hawaii islands

The 2018 Kilauea Eruption

The 2018 Kilauea eruption was the most destructive volcanic event in Hawaii in over 200 years:

Timeline and Impact

May-August 2018:

• Eruption began May 3, 2018 in Leilani Estates (Zone 1)
• 24 fissures opened across lower Puna
• Lava flows destroyed over 700 structures
• 14 square miles covered by new lava
• Entire communities buried (Kapoho, Vacationland Hawaii)
• Ocean entry created new land (extended coastline)

Insurance Lessons from 2018 Eruption

Coverage Problems:

1. No Coverage: Many Zone 1 properties uninsured or excluded volcanic damage
2. Insufficient Limits: Coverage limits below replacement cost
3. Exclusions: Volcanic eruption excluded from standard policies
4. Total Loss: Properties completely buried by lava (no recovery)

Claims Issues:

• Total losses for properties in lava flow path
• No salvage value for buried properties
• Land value reduced to zero (covered by lava)
• Displacement and additional living expense claims
• Difficult to determine exact loss timing

Aftermath:

• Increased insurer reluctance to write Zone 1-2 coverage
• Premium increases for all Big Island properties
• More volcanic exclusions in policies
• Increased focus on lava zone classification

Volcanic Coverage in Property Policies

Standard Homeowners Policy Coverage

HO-3 (Special Form):

• Volcanic Eruption: Often EXCLUDED from standard policies
• Earthquake Endorsement: May cover volcanic earthquakes but NOT lava damage
• Separate Volcanic Endorsement: Available from some insurers (expensive)

Common Policy Language: "We do not insure for loss caused directly or indirectly by:

• Earth movement, including but not limited to earthquake, volcanic eruption, landslide, mudflow, subsidence, or sinkhole."

Exam Tip: Standard homeowners policies typically EXCLUDE volcanic eruption damage. Volcanic coverage requires separate endorsement or specialized policy. Earthquake insurance covers shaking damage but NOT lava flows.

Volcanic Eruption Coverage Options

Option 1: Volcanic Eruption Endorsement

• Adds volcanic eruption coverage to homeowners policy
• Typically covers lava damage, volcanic gases, ash
• Expensive ($1,000-5,000+ annually depending on zone)
• May have sub-limits and higher deductibles
• Often unavailable in Zones 1-2

Option 2: Earthquake Insurance with Volcanic Coverage

• California Earthquake Authority (CEA) model
• Covers both earthquake shaking and volcanic eruption
• Available through some insurers in Hawaii
• Expensive in high-risk zones
• Separate policy or endorsement

Option 3: Named Perils Policy

• Lists specific covered perils
• Volcanic eruption can be added as named peril
• Limited availability
• Very expensive in Zones 1-3

What Volcanic Coverage Includes

Typically Covered:

• Direct lava flow damage to dwelling and structures
• Volcanic gases and ash damage
• Volcanic projectiles (rocks, debris)
• Smoke and fire from volcanic activity
• Contents damaged by volcanic eruption

Typically NOT Covered:

• Land value loss (lava covering land)
• Earthquake shaking damage (requires separate earthquake coverage)
• Tsunami damage from volcanic activity (flood insurance needed)
• Gradual volcanic gas corrosion
• Landslide or mudflow (may require separate coverage)

Producer Responsibilities for Volcanic Risk

Client Education

Disclosure Requirements:

1. Explain Lava Zone: Disclose property lava zone classification and risk level
2. Standard Policy Exclusion: Explain that volcanic damage typically excluded
3. Coverage Options: Discuss volcanic endorsement availability and cost
4. Zone Impact: Explain how lava zone affects insurability and premiums

Risk Assessment

Questions to Ask:

• What lava zone is the property in?
• Is volcanic eruption damage covered or excluded?
• Does client want volcanic coverage? (availability and cost)
• Does client understand total loss risk in Zones 1-2?
• Is property mortgaged? (lender may require coverage)

Lava Zone 1-2 Properties

Special Considerations:

• Limited or no coverage available
• Mortgages difficult to obtain
• Property values significantly lower
• Buyer/seller disclosure critical
• Consider advising against purchase (risk management)

Documentation:

• Written disclosure of lava zone and volcanic risk
• Acknowledgment that coverage may be unavailable
• Explanation of potential total loss exposure
• Client signature on risk disclosure

Replacement Cost Considerations

Volcanic Risk Properties:

• Replacement cost may exceed normal due to limited contractors
• Access issues in remote volcanic areas
• Higher construction costs on Big Island
• Consider guaranteed replacement cost coverage (if available)