Is Earthquake Insurance Worth It?
It may come as a surprise, but earthquake damage is not covered under a standard homeowner insurance policy. And because coverage can be expensive, many homeowners risk it and forgo coverage to save money.
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. The damage can be not just costly, but catastrophic. That’s why, if you can afford to foot the bill on top of homeowners insurance costs, then earthquake insurance might be worth it—especially if you live near a fault line.
Let’s take a look at how this type of insurance coverage works and if it’s right for you.
What Is Earthquake Insurance?
Earthquake insurance provides coverage for your home in the event that an earthquake causes damage to it. It covers the cost to rebuild your home and replace your belongings if they’re destroyed by an earthquake. If an earthquake causes significant damage to your home, your policy can also cover the cost of temporary living expenses—including hotel stays, restaurant meals, pet boarding, and other living expenses while your home is being rebuilt. This type of insurance is separate from standard homeowners or renters insurance. If an earthquake damages your home and you don’t have earthquake insurance, you’ll most likely end up paying out of pocket for any repairs.
Do I Need Earthquake Insurance?
If you’re unsure about whether earthquake insurance makes sense for you, start by taking a look at your home’s earthquake risk. The National Seismic Hazard Map will give you an idea of how close you live to a fault line. It may come as no surprise that homes in California, Alaska, Oregon, Washington, Nevada, and Hawaii are at particularly high risk of earthquake damage. But in recent years, Oklahoma and Texas have experienced 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 United States Geological Survey (USGS) offers a helpful list of factors that you should consider when evaluating your earthquake insurance needs, including:
- Your home’s proximity to an active fault
- Frequency of earthquakes in your region
- How long it’s been since the last earthquake
- Your home’s construction type — if it’s a stone or brick home, it has a higher probability of being damaged by an earthquake
- The soil condition and slope of the land
- Whether or not your home is built specifically to withstand earthquakes
- The cost of earthquake insurance and policy factors — like the deductible amount
These might seem like a lot to consider, but they’re all important to keep in mind. The simplest way to decide whether or not you need earthquake insurance rests on the following three questions:
- How likely is it that an earthquake will happen?
- How likely is it that an earthquake would cause damage to your home?
- Would you be able to afford to repair or rebuild your home after an earthquake without the help of insurance?
That last question is the most important, because while the majority of earthquakes cause little or no damage, it only takes one big one to wreak catastrophic damage to your home.
How Much Does Earthquake Insurance Cost?
There’s no getting around it: Earthquake insurance can be expensive, and the more likely you are to need it, the more it will likely cost you. The cost of earthquake insurance is largely determined by the amount that it would cost to rebuild your home at the current prices of construction and labor. Your dwelling coverage limit should be equal to this amount, not your home’s sale price.
The amount your policy will cost depends on the amount of coverage you purchase, your deductible and factors relating to the home itself, including its age and where it’s located in relation to known faults. In California, every $100,000 of earthquake coverage will cost you $500 to $1,000 in annual premiums—but if you live in a lower risk state, you may only pay a few hundred dollars per year.
Along with the amount of coverage in your policy and your policy deductible, the variables that determine your rate include:
- Your home’s age and location
- The number of stories in your house
- Your home’s rebuilding cost
- The soil type on your property
- The construction type of your home (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).
- Your area’s proximity to fault lines and seismic activity
What Does Earthquake Insurance Cover?
Earthquake insurance covers the cost of rebuilding your home or replacing your belongings after an earthquake or the aftershocks that follow. Keep in mind, earthquake insurance typically only covers direct damage to the property resulting from the shaking of an earthquake.
It will not cover indirect damage, such as fires or flooding as a result of an earthquake. If your home has fire and/or water damage from burst gas and water pipes, it will be covered under your 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. A standard earthquake policy consists of the following coverages:
- Dwelling coverage: Covers the cost of repairing or rebuilding your house and any attached structures, like a garage or patio. However this will not cover a pool or fence.
- Personal property coverage: Covers the cost of repairing or replacing damaged belongings, including furniture, clothing, appliances, and electronics. However, this does not cover any vehicles, since those would be covered by your auto insurance policy.
- Additional living expense coverage: If you’re unable to live in your home during repairs, this portion covers temporary living expenses such as hotel stays, restaurant meals, pet boarding, etc.
You can also add optional coverages to your earthquake policy for an additional cost. The most commonly offered add-ons are:
- Building code upgrades coverage: Covers the added cost of rebuilding your house up to current building codes
- Emergency repairs coverage: Pays for the cost of immediate repairs intended to prevent further damage after an earthquake.
Protect Your Home and Save With Earthquake Insurance
Want to ensure your home and financial livelihood are protected in the event of an earthquake? Thanks to our fast and affordable free home 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 your family and home are protected when you need it most.
