Homeowners Insurance and Earthquakes

Earthquakes and home insurance

According to the United States Geological Survey (USGS), the U.S. experiences approximately 55 earthquakes each day. Of course, not every earthquake causes extensive damage, and some aren’t even strong enough to be felt. However, when the big one hits, earthquake damage can be catastrophic.

Those who live in major earthquake zones are likely aware of the damages that can occur. Structural damage, power outages, fires and water damage are just a few of the perils that can come as a result of an earthquake. The USGS reports 42 states are at-risk for earthquakes. Most homeowners are not aware of how earthquakes are handled by insurance companies, which could put many at risk.

Read on to learn how to find a homeowners insurance policy that protects you against earthquake damage.

Does homeowners insurance cover earthquakes? — table of contents:

1. Are earthquakes covered by home insurance?
2. How to get earthquake insurance
3. Which states offer earthquake insurance?
4. What does earthquake insurance cover?
5. What is an earthquake deductible?
6. How much does earthquake insurance cost?
7. How are earthquake insurance rates determined?
8. How do earthquake claims affect premiums?
9. Is earthquake insurance worth it?

 

 

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Are earthquakes covered by homeowners insurance? 

Earthquakes are not covered by standard homeowners and renters insurance policies. Regular homeowners policies specifically exclude earthquakes. Much like with flood insurance, in order to be covered, you’ll need to seek out an endorsement or a separate earthquake policy.

Some private insurance companies offer earthquake insurance as an endorsement that can be added to your regular homeowners policy. Keep in mind that you will likely still have to pay a separate deductible, as discussed later in this article.

 

How to get earthquake insurance 

Your first step should be to contact your current homeowners insurance company to see if the company offers earthquake endorsements. It’s unlikely that every private insurance company in your state will offer this coverage unless you live in California, where all home insurance companies are required by law to offer earthquake insurance to policyholders every other year. In fact, the California Earthquake Authority (CEA) is the biggest provider of earthquake coverage in the state, fulfilling policies on behalf of private insurers.

If your insurance company doesn’t offer an earthquake endorsement, you can often get a homeowners earthquake insurance policy by contacting your state’s department of insurance for more information.

 

Which states offer earthquake insurance? 

Earthquake insurance is available in most states. However, some states are at a greater risk of earthquake damage than others. As such, it could be wise to seek a homeowners earthquake insurance policy if you live in one of the following states: Alaska, California, Hawaii, Idaho, Illinois, Kentucky, Missouri, Montana, Nevada, Oklahoma, Oregon, South Carolina, Tennessee, Utah, Washington and Wyoming.

 

What does earthquake insurance cover?

Earthquake insurance policies cover damage occurring to your home as a direct result of the seismic event. Earthquake coverage often extends to aftershocks occurring within a certain amount of time after the primary earthquake. This extended time period is determined by your insurer but usually falls somewhere between 24 and 36 hours.

The following losses are typically covered by an earthquake policy:

• Structural damage: If the structure of your home is damaged, this policy will pay for repairs.
• Personal property: Any belongings damaged by the quake will be covered up to your policy limits.
• Replacing your house: If your home is destroyed by an earthquake, this policy will pay to have it rebuilt to the previous standard.
• Temporary housing: Often referred to as additional living expenses, this coverage will pay for a place to stay while your home is being repaired.

Associated perils such as floods, sinkholes, fires and vehicle-related damage are not covered by your earthquake insurance policy. You will need to consult with your insurance company to see about adding appropriate coverage to protect against them.

 

What is an earthquake deductible for home insurance and how does it work?

Regardless of whether your earthquake coverage is an endorsement or an entirely different policy, a separate earthquake deductible will apply. Instead of a set dollar amount, an earthquake deductible is usually set between 2% and 20% of your dwelling coverage. The percentage you will pay is usually determined by your proximity to a fault line or area of active seismic activity.

As an example, if your dwelling limit is $200,000 and you have a 5% deductible, you can expect to have $10,000 deducted from your home insurance payout.

 

How much does earthquake insurance cost? 

The national average for earthquake insurance with a 5% deductible is $1,306, compared to a national average of $1,211 for policies without this coverage. The cost of earthquake insurance can vary widely depending on a number of factors. Below, you’ll find some average rates for homeowners insurance with added earthquake coverage. Take a look at the following earthquake coverage rates for some of the more at-risk states. Note that these rates are for a policy with a $200,000 dwelling limit and a 5% earthquake deductible (methodology).

State	Rate Without Earthquake Coverage	Earthquake Coverage w/ 5% Deductible
Alaska	$764	$1,010
California	$714	$1,213
Hawaii	$304	$462
Idaho	$720	$941
Illinois	$1,188	$1,264
Kentucky	$1,222	$1,289
Missouri	$1,734	$1,820
Montana	$1,474	$1,705
Nevada	$754	$1,046
Oklahoma	$2,987	$3,021
Oregon	$623	$802
South Carolina	$1,439	$1,563
Tennessee	$1,362	$1,459
Utah	$668	$982
Washington	$822	$990
Wyoming	$917	$950

 

How are earthquake insurance rates determined?

Earthquake insurance rates are determined by a number of different factors. Your home’s dwelling coverage limit is one such factor. This limit should be set to the amount of money that it takes to rebuild your home to its previous standard. Bear in mind this is not equal to the home’s market value.

Other factors that determine your earthquake insurance rates could include the following:

• ZIP code: If your home is in close proximity to high-risk earthquake zones, you can expect higher rates.
• Building materials used in your home: Certain materials stand up better than others. For instance, if you have a brick home, you’ll likely have to pay less for insurance coverage because it's a more resistant and hardier material than something like wood.
• Age of your home: Older homes are less likely to have been built with earthquake-resistant materials.
• Foundation type: The type of foundation your home has could affect its ability to withstand an earthquake.

 

Do rates increase after an earthquake claim?

Nationally, rates increased by about 8% after an earthquake claim. Severe damage or catastrophic earthquake losses can lead to more drastic rate hikes. See the table below to see average premiums on up to two claims.

Number of Claims	Average Annual Premium	% Difference
No Claims	$1,478	-
1 Earthquake Claim	$1,594	+8%
2 Earthquake Claims	$1,667	+5%

If you're looking for the cheapest home insurance after an earthquake claim, consult the sample rates below from top home insurance companies.

HOME INSURANCE PREMIUMS BY COMPANY AFTER EARTHQUAKE CLAIM

Insurance Company	Rate After Earthquake Claim
Allstate	$1,642
American Family	$2,375
Farmers	$1,477
Liberty Mutual	$1,518
Nationwide	$1,255
State Farm	$1,464
Travelers	$1,645
USAA	$1,344

Nationwide could be the most affordable option for homeowners insurance after an earthquake loss, with an average monthly premium of $105.

 

Is earthquake insurance worth it? 

Whether or not you need earthquake insurance is largely determined by where you live. If you live in an area prone to seismic activity — like the west coast or Oklahoma — it’s likely that you already know the importance of earthquake coverage. However, some residents of areas like South Carolina and Missouri may be less accustomed to such events, though they are still considered at risk. As such, if you live in a state where earthquakes can occur, it’s definitely worth the consideration.

The cost of earthquake insurance could also be a factor for some, especially when you think about having to add a separate policy in many cases. Finding a cheaper base policy could be a good way to help with the overall cost. Regularly shopping around to get a better rate on your standard homeowners coverage is a good way to do this. Enter your ZIP code below to see home insurance quotes from some of the nation’s top providers. 

 

 

Sources

• Insurance Information Institute
• Background on Earthquake Insurance and Risk
• US Geological Survey: Earthquake Hazards