Do I Need Earthquake Insurance Coverage?
If you don’t live in a region or state that’s known for a potential risk of earthquakes, you might think this type of insurance coverage doesn’t apply to you. But the truth is, an earthquake can happen in all 50 states—the USGS even reports 42 states are at-risk for seismic activity. Structural damage, power outages, fires and water damage are just a few of the perils that can result after an earthquake—and the damage can be catastrophic.
Want to ensure your home and financial livelihood are protected in the event of a natural disaster? Read on to find out how earthquake insurance will give you peace of mind when you need it most.
What is Earthquake Insurance?
Earthquake insurance is a type of coverage that pays for damages and other losses that you may suffer after a bad earthquake. First, it pays for the cost of repairing or replacing your home, as well as your belongings. If the earthquake caused significant damage to your home, your policy can also reimburse you for temporary living expenses (hotel stays, restaurant meals, etc) while your house is being repaired.
A basic homeowners insurance policy doesn’t cover earthquake damage, so if you live in a high-risk area that has a potential for dangerous seismic activity, you should strongly consider purchasing earthquake insurance.
Do I Need Earthquake Insurance?
It may come as no surprise that California accounts for around two-thirds of the country’s earthquake risk. But some of the most frequent seismic activity actually occurs in the central U.S. In recent years, Oklahoma and Texas have experienced more frequent earthquakes, likely due to an increase in hydraulic fracturing, or fracking. In fact, Oklahoma had the most earthquakes in the nation in 2015.
The U.S. Geological Survey can help you track your state’s tremor timeline. If you live in California, Oklahoma, Texas, or any other state that’s prone to earthquakes and you’re unsure about getting coverage, you should consider the following:
- If a severe earthquake occurs, will you have the funds to repair or rebuild your home?
- Can you afford to replace all of your belongings if they’re destroyed in an earthquake?
- Do you have the financial means to live elsewhere for an extended period of time while your house is being rebuilt after an earthquake?
Where Can I Buy Earthquake Insurance?
In California, the law requires home insurance companies to also provide earthquake coverage, available to Golden State residents through the California Earthquake Authority (CEA).
If you live elsewhere and need to open an earthquake insurance policy, start with your current homeowners or renters insurance company. Many offer earthquake protection as an add-on to your policy, which extends your home insurance to cover earthquake damage for an additional fee.
If your current insurer doesn’t offer earthquake coverage, you’ll need to shop around for a separate policy through a company that offers it. Your state’s Department of Insurance website can also be a resource for finding licensed earthquake insurers. One caveat to remember, however, is that if an earthquake has just occurred in your area, insurers typically won’t sell new policies for one or two months.
What Does Earthquake Insurance Cover?
Earthquake insurance typically only covers direct damage to the property resulting from the shaking of an earthquake. It may also cover damage from a volcanic eruption that is triggered by an earthquake.
However, indirect damage—including fire and water damage from burst gas and water pipes—is covered under a homeowners policy. If your home is damaged by an earthquake and you don’t have this coverage, you’ll likely have to pay for repairs entirely out of your own pocket.
There are the four main components to earthquake coverage, including:
- Dwelling coverage: This part of your policy covers your home itself, paying to rebuild or repair your home if it’s damaged or destroyed by an earthquake.
- Other structures coverage: Do you have other structures on your property such as a detached shed, garage, or fence? This part of your policy covers any structures that could be damaged by an earthquake.
- Personal property coverage: As the name suggests, this coverage will take care of your belongings—things like furniture, clothing, appliances, etc.
- Additional living expense coverage: If you’re unable to live in your home during repairs, this portion of your insurance will pay for hotel stays or transportation costs until it’s safe to return.
What Does Earthquake Insurance Not Cover?
As mentioned above, earthquake insurance typically only pays for damages from earthquakes or from a volcanic eruption that is the direct result of an earthquake.
If you experience a different type of natural disaster—such as a fire, flood, or sinkhole—it will be covered by home insurance and flood insurance, even if the disaster was caused by an earthquake.
Earthquake coverage also won’t pay if your car is destroyed or damaged due to seismic activity. In this case, your auto policy will take care of any damage to your vehicle.
Finally, certain items or materials are also typically excluded from earthquake coverage. Depending on your policy, these may include:
- Masonry (the brick, rock, or stone used for your home’s veneer)
- Breakable items and fixtures (such chandeliers or china)
How Much Does Earthquake Insurance Cost?
The amount you can expect to pay for car insurance coverage can vary widely depending on where you live and how your home is built. For example, the average cost for a policy in California runs at $800 annually—but if you live in a lower risk state, you may only pay a few hundred dollars in annual premiums. On the other hand, a masonry home (made of brick, rock, or stone) could cost thousands of dollars a year to insure, especially if it’s located near an active fault.
Along with the amount of coverage in your policy and your policy deductible, the variables that influence your monthly premium include:
- Your home’s location
- The age of your home
- The number of stories in your house
- Your home’s rebuilding cost
- The soil type on your property
- The building materials used in your home
- Your area’s proximity to fault lines and seismic activity
How Do Earthquake Insurance Deductibles Work?
When you file a claim for earthquake damage to your home or personal property, you’ll need to pay a deductible—the amount you pay out of pocket before your insurance kicks in.
But earthquake insurance deductibles often work differently than, say, homeowners insurance deductibles. While home insurance often has one deductible that applies to most of your structures and possessions, some earthquake insurance companies use separate deductibles for each part of the policy: dwelling and personal property.
For example, if you choose $200,000 of dwelling coverage with a 10% deductible, you’d have $20,000 deducted from the reimbursement that goes toward repairing or rebuilding your home. On the other hand, if your personal property coverage limit was $50,000 with the same deductible, you’d have $4,000 subtracted from your settlement for replacing your possessions.
When you’re considering a potential provider, make sure to ask if they offer one overall deductible or separate deductibles for dwelling and personal property coverage. If you’re able to choose, a lower deductible will allow you to get the most out of your policy if you ever have a claim, although you’ll face steeper rates. Most policies will give you the option of setting your deductible at 5%, 10%, 15%, 20%, or 25% of the dwelling coverage limit, or the amount your house is insured for.
See How Much You Can Save on Earthquake Insurance
Protecting your home from natural disasters is a must no matter where you live—but it’s especially critical if you live in an area that’s prone to earthquakes. Thanks to our fast and affordable home online insurance quotes, you can choose an earthquake insurance plan and get your coverage—all in a matter of minutes. Get your free quote today and enjoy the peace of mind that you and your family are financially protected against any disaster that comes your way.