Earthquake insurance: Do you need it?

Key points:

• Standard homeowners insurance policies don’t cover damage from earthquakes.
• Earthquake insurance policies cover damage to your home and personal property due to the effects of the quake, but not from any resulting fire, flooding or other hazards.
• Earthquake insurance costs an average of $800 per year but can exceed $2,000 in areas that are high risk.

Standard homeowners insurance policies exclude coverage for damage caused by earthquakes. That means if your house is damaged or destroyed by an earthquake, you won’t be able to file a homeowners insurance claim to help pay for repairs. You’ll need to purchase separate earthquake insurance if you want to be reimbursed for quake damage to your property. 

What is earthquake insurance?

Earthquake insurance pays to rebuild or repair your house and belongings if they are damaged or destroyed as a result of an earthquake. 

Some homeowners insurance companies offer an earthquake coverage endorsement that you can add on to your homeowners policy for an additional cost. This coverage may be less comprehensive than a standalone earthquake insurance policy but could be a more affordable option. 

What earthquake insurance covers

Earthquake insurance covers the cost of rebuilding or repairing your house and replacing your damaged belongings. It can also pay for you to temporarily live elsewhere if your home is uninhabitable after a bad earthquake. 

Here’s how the different coverages in an earthquake insurance policy work:

• Dwelling: Pays to repair or rebuild your house and structures attached to it after an earthquake.
• Other structures: Pays to repair or replace structures not attached to your house, like a shed or fence. 
• Personal property: Pays to repair or replace your personal belongings, like your clothing, furniture and electronics after quake damage. 
• Additional living expenses: Pays for additional expenses you incur if you need to temporarily relocate while your home is being rebuilt. This can include hotel stays, restaurant bills, pet boarding and other additional living expenses. 

What earthquake insurance doesn’t cover

Earthquake insurance may not cover damage that occurs after the quake or before it. Here’s what’s typically not covered by earthquake insurance.

• Fire damage caused by a quake. Your homeowners insurance will cover this.
• Sinking or contracting not from an earthquake, like from moisture in the land.
• Flood damage.
• Damage to your vehicle.
• Sinkhole damage.

How to get earthquake insurance

You may be able to buy earthquake insurance through your home insurance company. There are also specialized earthquake insurance companies, like GeoVera, that sell earthquake insurance. 

“Earthquake insurance means different things in different states,” says Ian Gutterman, CEO of Informed Group, a company that educates consumers on the insurance industry. “In most places it is an option to add to your policy. However, in states like California, it is a separate policy with different levels of coverage.”

How much does earthquake insurance cost?

The average cost of earthquake insurance is about $800 per year, according to the insurance company Lemonade. However, the cost depends on many factors, including your risk of experiencing an earthquake and the cost of rebuilding your home. 

In parts of California, where earthquake risk is higher, the cost of earthquake insurance can cost about $2,000 per year.

Factors that will affect the cost of your earthquake insurance policy include:

• The age of your house.
• Your proximity to a fault line.
• The type of foundation you have.
• Your construction type — masonry vs. frame.
• Your roof type.
• Your deductible.
• The cost to rebuild your house.

How does an earthquake insurance deductible work?

Unlike home insurance deductibles, earthquake insurance deductibles are set at a percentage of your dwelling coverage. A deductible is the amount of money that will be deducted from your claim payout. Earthquake insurance deductibles typically range from 5% to 25% of the coverage amount.

Here’s an example of how earthquake insurance deductibles work. 

Say you have $250,000 worth of earthquake insurance and your deductible is set at 15%. That means in the event of a total loss, $37,500 would be subtracted from your claim payout and your claim check would be $212,500. 

Who needs earthquake insurance?

If you live in an area prone to earthquakes, you should at least consider buying earthquake insurance. 

If you live in California, Oregon, Washington, Nevada, Hawaii or Alaska, for example, you’re at an increased risk of earthquakes.  

“Even if you don’t live in any of those high-risk areas, your home could still sustain damage from an earthquake as tremors can be felt several miles away from the epicenter,” says Ari Shpanya, CEO of LoanBase, a property financing company.

About California earthquake insurance

In California, homeowners insurance companies are mandated to offer earthquake insurance when you purchase home insurance. However, you are not required to buy earthquake insurance and typically have 30 days to accept the policy. 

The average earthquake insurance cost in California is $738 annually, according to the California Department of Insurance. However, you may be able to score discounts if you retrofit and earthquake-proof your home.

The California Earthquake Authority (CEA) provides most of the earthquake insurance policies in the state and sells them through homeowners insurance companies. The CEA offers the following deductible choices: 5%, 10%, 15%, 20% and 25%.

How much earthquake insurance do I need?

How much earthquake insurance you need depends on a variety of factors, like the rebuild cost of your house, its location and its proximity to a fault line. 

Here are some other factors to take into account when deciding how much earthquake insurance you need, according to the U.S. Geological Survey (USGS).

• The seismic history of your region.
• The amount of time since the last earthquake.
• Your home’s architectural layout.
• The slope of your land.
• The annual rainfall in your area.
• The cost of insurance and restrictions on coverage.

Just like home insurance, consider purchasing enough earthquake insurance to cover the cost of rebuilding your house to its prior state after an earthquake. Your insurer may require you to have the same amount of earthquake insurance dwelling coverage as you have in your homeowners policy.

What to consider when buying earthquake insurance

When considering earthquake insurance, you should assess your house’s risk. There are seismic maps available on USGS that can show how close your house is to a fault line. You should also consider the frequency and severity of earthquakes that occurred in your area in the past. 

Standalone earthquake insurance policies can be expensive, especially on top of the cost of home insurance, so your personal finances should also be something you consider. Check with your homeowners insurance company to learn if it offers earthquake endorsements that you can add as additional coverage to your home insurance policy, as this will likely be the cheaper option. 

Ultimately, you’ll need to decide if you’d rather pay earthquake insurance rates or risk having to pay out of pocket in the event your house is badly damaged after an earthquake.

Earthquake insurance FAQs