Does your homeowners insurance policy cover earthquakes or related damages?
According to the United States Geological Survey, 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.
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.
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.
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.
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:
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.
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.
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|
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:
Nationally, rates increased by about 10% 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 three claims.
|Number of Claims||Average Annual Premium||% Difference|
|1 Earthquake Claim||$1,363||8.5%|
|2 Earthquake Claims||$1,384||1.5%|
|3 Earthquake Claims||$1,402||1.3%|
|Insurance Company||Rate After Earthquake Claim|
Nationwide could be the most affordable option for homeowners insurance after an earthquake loss, with an average monthly premium of $109.
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.