Even though earthquakes present a serious threat in several states, earthquake insurance — and how to go about getting it — can be a bit mystifying.
Standard home insurance doesn’t pay for any damage from earthquakes. Your insurer may offer earthquake insurance as an add-on to your homeowners policy for an extra cost or as a separate policy. In some cases, you may need to find another insurer that sells it.
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Who needs earthquake insurance
Earthquake insurance isn’t mandatory. Although quakes can happen in all 50 states, some places are more prone to them, and in those cases earthquake insurance becomes a more important purchase.
In Western states, residents are (hopefully) well aware of the risks and the need for insurance. But in other regions, frequent seismic activity may come as a surprise. For example, Oklahoma — known primarily as a tornado hotbed — had the most earthquakes in the nation in 2015, likely due to an uptick in hydraulic fracturing, or fracking.
The U.S. Geological Survey can help you track your state’s tremor timeline.
Of course, even one large earthquake can be devastating, and you probably can’t afford to rebuild your home and replace all your belongings out of pocket. That’s where earthquake insurance comes in.
Where to buy earthquake insurance
If you’re in the market for earthquake insurance, start with your current homeowners or renters insurance company. Ask whether it offers either an add-on to your policy or a stand-alone earthquake policy.
In California, the law requires home insurance companies to also provide earthquake coverage. Golden State residents can also seek coverage from the California Earthquake Authority.
If you live elsewhere and your current insurer doesn’t offer coverage, you’ll need to shop around. Your home or renters insurer can help point you in the right direction. Your state’s Department of Insurance website can also be a resource for finding licensed earthquake insurers, both big and small.
Inside an earthquake insurance policy
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Depending on your policy, coverage for other structures, such as a carport or toolshed, and debris removal may also come standard.
Optional coverage may include:
- Building code upgrades.
- Land restoration.
- Emergency repairs.
How much coverage do you need?
If you’re a homeowner, your insurer usually sets the same limits on dwelling coverage for both earthquake and home insurance. If you’re a renter, you don’t need to worry about adding dwelling coverage.
Your personal property coverage limit may initially be set on the low side, around $5,000 or 10% of your dwelling coverage, but you can raise this amount to your insurer’s maximum. However, there may be caps on how much your insurer will pay for any one item.
Earthquake insurance deductibles
Compared to home insurance, earthquake policies contain a steep deductible, which is the amount subtracted from your claim payment. Insurers will deduct between 10% and 20% of your dwelling coverage limit.
Another difference is that 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 instance, imagine a severe earthquake leveled your house and destroyed your belongings:
- If you had $200,000 of coverage for your dwelling with a 20% deductible, you’d have $40,000 deducted from the claims check that goes toward rebuilding your home.
- Let’s say your personal property coverage limit was $50,000 with the same deductible. You’d have $10,000 subtracted from your settlement for replacing your possessions.
It’s important to ask potential insurers if they have one overall deductible or separate ones. If you’re able to choose your deductible, going as low as you can will enable you to get the most out of your policy if you ever have a claim, although your rates will be higher.
How earthquake insurance rates are determined
Rates for earthquake insurance will depend on your coverage limits, deductible and a handful of other factors, including:
- Your ZIP code.
- 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.
For a ballpark cost estimate, we ran a sample quote for a San Francisco house through the California Earthquake Authority. For $985 a year, you could insure a 30-year-old home for $400,000, including $50,000 of personal property coverage, $1,500 of loss of use coverage and a 10% deductible.
It’s always smart to review your policy with your insurer. A representative can clearly explain the factors that went into your rate, tell you what is and isn’t covered, and suggest other policies to fill any gaps.
Alex Glenn is a staff writer for NerdWallet, a personal finance website. Email: firstname.lastname@example.org.
This article was updated on May 18, 2016. It originally published on July 20, 2012.