Should I Add Earthquake Insurance to My Home Coverage?
Free Insurance Quote Comparison
Secured with SHA-256 Encryption
UPDATED: Aug 13, 2020
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
Homeowners insurance policies do not cover earth movement such as earthquakes, mudslides and shifting. Because of this, many homeowners purchase additional earthquake insurance to protect themselves from these types of disasters. In some places, earthquake insurance is required by lenders as a condition of a mortgage agreement because they want to protect the collateral of the loan (the home). Even if your lender does not make earthquake insurance a mandatory coverage, you may want to consider purchasing it if there is a distinct possibility that where you live may have an earthquake.
TIP: Earthquake damage can be costly, so having home insurance coverage in place may be worth the extra investment if your area is an earthquake risk.
The Cost of Earthquake Insurance
Earthquake insurance does not come cheap and the coverage usually comes with high deductibles. As with any home insurance premium, the price depends on how frequent and how expensive claims are likely to be. Foundational and structural damage, both costly problems to fix, are all too common with earthquakes, so any claim associated with one will be expensive. Earthquake insurance cost is also dependent on your location. If you have a home and are purchasing earthquake insurance in California, your coverage would be much more expensive than if you lived in Virginia because your probability of having a claim is greater in California.
TIP: A higher deductible will offset this by lowering your premium. But make sure the deductible is still something you can afford. It is not uncommon to see a $5,000 deductible on earthquake insurance coverage.
Earthquake Insurance Coverage
Earthquake insurance coverage varies from policy to policy. Most policies provide coverage for your dwelling as well as offering home contents insurance. As with any policy, your earthquake coverage has limits to how much you will receive to repair or replace your home and possessions. Normally, coverage limits in earthquake insurance are listed as a flat amount as opposed to a percentage of your overall coverage. Pick a coverage limit that you are comfortable with and can afford.
Additional living expenses are also covered by earthquake insurance. This will pay for you to live in a hotel or apartment in the event your home becomes uninhabitable while the repairs are being made. Again, this will be a flat amount of coverage.
Like with all types of home insurance policies, there are exclusions. For instance, the typical earthquake insurance policy does not cover the loss of landscaping, pools, fences, and separate structures (including garages) and is likely to exclude claims for broken chandeliers, crystal and china. Make sure you understand any exclusion listed in your earthquake insurance policy.
Earthquake Insurance in California
In 1996, California passed legislation creating the California Earthquake Authority (CEA) — a state-managed authority that offers a very restricted earthquake policy. According to the California Earthquake Authority (CEA) the laws in the state of California require insurers that provide property insurance to also provide earthquake coverage to homeowners in that state. In offering earthquake insurance, insurance companies can become participating insurance companies by offering a CEA earthquake policy or by providing one of their own. More than two-thirds have opted to participate.
The CEA also offers premium discounts on their policies when homeowners retrofit their older homes to fit current earthquake standards. Things such as bolting the home to a foundation or brace cripple walls with plywood as well as strapping water heaters to the home’s structure are all examples of improvements that could discount your premium. Contact the CEA for more information about the current earthquake standards that will earn you a discount.
There are also some companies that write only earthquake insurance. Shop around to find the best program to fit your needs. Always make sure you check the financial standing of any insurance company and choose only companies that have a rating of A+ or A. If you would like to receive an earthquake insurance quote, click here and get a free home insurance quote today.