What Is Earthquake Insurance?

How Does Earthquake Insurance Work?

Earthquake insurance works like most types of insurance: You pay premiums to maintain your policy, file a claim when you suffer damages and are responsible for paying a deductible before your insurance coverage kicks in. You typically can't buy earthquake insurance unless you have homeowners insurance.

Earthquake insurance usually has certain limitations, such as caps on coverage and restrictions on what is covered. These limits, your deductible and the cost of the policy are all important factors to keep in mind when deciding if earthquake insurance makes financial sense for you.

What Does Earthquake Insurance Cover?

Earthquake insurance typically covers your home's structure, your personal property, loss of use of your home, the cost of bringing your home up to code and the cost of making temporary repairs to prevent further damage.

• Dwelling coverage pays to repair or rebuild your home's structure in compliance with current building codes after it's damaged by an earthquake. Dwelling coverage also applies to attached structures, but not separate structures such as detached garages, gazebos or sheds. Your dwelling coverage limits are typically the same as your home's insured value on your homeowners insurance.
• Personal property coverage pays to replace personal belongings, such as furniture or appliances, that are damaged due to an earthquake. You may have the option to choose different coverage limits. Some earthquake policies have a separate deductible for personal property claims.
• Loss of use coverage kicks in if the insurance company determines you can't live in your home during repairs. Also called additional living expense (ALE) insurance, it covers the extra cost of living elsewhere, such as staying in a hotel and eating out.
• Building code upgrade coverage helps pay for repairs or modifications that may be required during rebuilding to bring your home up to current local building codes.
• Emergency repair coverage pays to make temporary repairs that are needed to avoid further damage to your home, such as covering a hole in the roof or boarding up broken windows.

Tip: Dwelling coverage deductibles for earthquake insurance are usually 5% to 25% of your home's insured value. If you have a 10% deductible and $300,000 in coverage, you'll pay $30,000 before insurance kicks in.

What Isn't Covered by Earthquake Insurance

Earthquake insurance usually doesn't cover the following types of damage.

• Fire damage caused by an earthquake—for example, if your gas pipes rupture. Fire damage is typically covered by homeowners insurance.
• Water damage from inside your home, such as water pipes bursting due to an earthquake. Your homeowners insurance usually covers this type of water damage.
• Water damage from outside your home, such as a flood or tsunami. You'll need flood insurance to cover this.
• Damage to your car. Earthquake damage to your vehicle may be covered by comprehensive auto insurance if you carry it.

Before you choose an earthquake insurance policy, ask the provider to explain the policy details to ensure you get the coverage you need. Also ask about deductible amounts, since they may vary depending on the type of claim you file.

Learn more: Does Home Insurance Cover Natural Disasters?

How Much Does Earthquake Insurance Cost?

The cost of earthquake insurance for homeowners can vary widely, ranging from a few hundred dollars to several thousand dollars per year, according to Allstate.

Several factors impact the cost of earthquake insurance for homeowners, including:

• Your location: Homeowners who live on the West Coast or close to a fault line typically pay more for coverage since they're at higher risk.
• The age of your home: Older homes could cost more to insure because they typically aren't built to standards that help to minimize earthquake damage. Retrofitting your home to withstand earthquakes could qualify you for lower premiums.
• Your home's construction: You'll likely pay more to insure a multi-story home or a brick or masonry home, as they're less able to withstand earthquakes than single-story or wooden homes.
• Your deductible: Choosing a higher earthquake deductible usually reduces your premiums.

The California Earthquake Authority (CEA), the nonprofit, publicly managed agency that sells earthquake insurance in California, has a calculator you can use to estimate the cost of earthquake insurance.

Is Earthquake Insurance Worth It?

When deciding whether or not earthquake insurance is worth it for you, ask yourself these questions.

• Is your area vulnerable to earthquakes? Homes in California, Alaska, Oregon and Washington face the greatest risk of earthquakes. Purchasing earthquake insurance could ultimately save you thousands out of pocket, especially in California, which is the location of more home-damaging earthquakes than any other state. You can get more information about earthquake risks in your area at the U.S. Geological Survey (USGS) website.
• Could you afford to rebuild or repair your home? If you have a hefty emergency fund and are financially prepared for disaster, you may prefer not to pay for earthquake insurance, especially if you're in a low-risk area. Just keep in mind that if a quake does hit, you'll have to pay out of pocket to replace personal belongings, find temporary lodgings and repair your home—or, in the worst-case scenario, rebuild it from the ground up. Meanwhile, you'll still be responsible for mortgage payments, property taxes and homeowners insurance.
• Do the potential benefits of earthquake insurance outweigh the costs? There's no surefire way to know if an earthquake will hit or how much damage it will do. But if you believe the plan premiums are a small price to pay compared to the potential outlay for repairs, the peace of mind could be worth the cost of earthquake insurance.

Learn more: How Much Homeowners Insurance Do You Need?

How to Get Earthquake Insurance

Most home insurance companies also offer earthquake insurance, so you can start by contacting your current home insurance carrier. (CEA insurance can be purchased through private insurance carriers; visit the CEA website for a list of the insurance companies it works with.)

You'll typically want to buy the same amount of dwelling and personal possessions coverage that your home insurance offers. If you can't find coverage or can't get enough coverage through standard home insurance providers, you can also buy earthquake insurance from specialty insurance companies such as Geovera or Palomar.

This could also be a good time to make sure you're still getting the best price for homeowners insurance. You can get quotes from home insurance carriers online, by contacting the companies directly or by using an online insurance marketplace to get quotes from multiple providers in one place.

How to Save on Earthquake Insurance

If you decide earthquake insurance is right for you, try these tactics to save money on your policy.

• Shop around. Don't settle for coverage from the first provider you find. Once you've gotten quotes from several companies for the same amount and type of coverage, compare rates to find the most reputable carrier that fits your needs and budget.
• Improve your credit. Insurance companies in most states can use credit-based insurance scores to assess the risk that you'll file an earthquake insurance claim. Having poor credit could mean paying more for earthquake insurance. Paying your bills on time, paying down high credit card balances and not applying for new credit until you really need it could help boost your credit score.
• Increase your deductible. A higher deductible typically means a lower premium since you will assume more risk if an earthquake occurs. However, don't set your deductible so high that you couldn't afford to pay it in case of a claim.

Learn more: What Is a Credit-Based Insurance Score?

Frequently Asked Questions

The Bottom Line

While most earthquakes occur on the West Coast, some 42 states are at risk for earthquakes, according to the Insurance Information Institute. Earthquake insurance could be a smart way to protect your home, especially if you live in a high-risk region.

Your credit-based insurance score could impact your earthquake insurance premiums. While credit-based insurance scores differ from regular credit scores, they consider data from your credit report. Checking your credit score can give you a good idea of what your credit-based insurance score may be. You can check your credit report and FICO^® Score^Θ for free to see where you stand and whether your score could benefit from improvement.