Jane Dotson
Earthquakes can cause significant damage to homes and belongings, and in the worst cases, can demolish buildings altogether. Standard homeowners' insurance policies do not typically cover earthquake damage, so homeowners may need to purchase separate earthquake insurance to protect against these financial losses. Earthquake insurance is not mandatory, but it can provide valuable protection in the event of an earthquake. However, it's important to note that earthquake insurance policies often come with high deductibles and exclusions, and the cost of coverage can vary depending on factors such as the home's risk and location. So, can a homeowner walk away with earthquake insurance money? The answer is, it depends on the specific policy and the extent of the damage.
| Characteristics | Values |
|---|---|
| Earthquake insurance necessity | Earthquake insurance is not mandatory and is separate from standard homeowners or renters insurance. However, it is necessary if you want coverage for earthquake damage. |
| Homeowner's insurance coverage | Standard homeowner's insurance does not typically cover earthquake damage, except in the case of fire damage if a quake starts a blaze. |
| Earthquake insurance coverage | Earthquake insurance covers damage to your home, belongings, and other buildings on your property. It may also cover additional living expenses if you need to live elsewhere during repairs. |
| Deductibles | Earthquake insurance policies have high deductibles, typically ranging from 2.5% to 25% of coverage limits. The deductible is subtracted from the claim payout. |
| Cost | Earthquake insurance is expensive, with annual premiums in California averaging $739. Costs can vary based on coverage, risk, and other factors. |
| Exclusions | Earthquake insurance typically does not cover landscaping, pools, fences, masonry, or separate buildings. It also does not cover water damage, sinkholes, or fires associated with earthquakes. |
| Availability | Earthquake insurance is available as a standalone policy or as an add-on to existing coverage. It is provided by insurance companies that are members of the California Earthquake Authority (CEA). |
| Risk considerations | Almost three-quarters of Americans are at risk of earthquake damage, but only about 10% of those in high-risk areas have earthquake insurance. |
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What You'll Learn
Earthquake insurance deductibles
Earthquake insurance is an important consideration for those living in areas prone to seismic activity. Earthquake insurance deductibles are usually given as a percentage or a fixed dollar amount based on the insured value of the property. The deductible amount is the money you choose when purchasing a policy that will be subtracted from any future claims payouts.
There are two main types of earthquake insurance deductibles: percentage deductibles and fixed-dollar deductibles. A percentage deductible is calculated as a percentage of the insured value of your property. For example, if your property is insured for $500,000 and you have a 10% deductible, your out-of-pocket expense would be $50,000 for earthquake damage. Percentage deductibles are commonly used in earthquake insurance policies because they allow for a fair allocation of costs based on the insured value of the property. However, they can result in higher out-of-pocket expenses in areas with high property values.
A fixed-dollar deductible is a set amount that you must pay out of pocket for earthquake damage. For instance, if your policy has a $10,000 fixed deductible and you experience $75,000 in earthquake damage, you would be responsible for paying the full $10,000 before your coverage begins. Fixed-dollar deductibles are less common but can be beneficial for homeowners with lower property values or those who prefer a predictable expense in the event of an earthquake.
The cost of earthquake insurance deductibles depends on several factors, including your location, property value, and the insurance carrier you choose. Areas with higher earthquake risks typically have higher deductibles to reflect the increased likelihood of seismic activity and potential damages. The value of your property is another factor that influences your earthquake insurance deductible; higher insured property values generally mean higher deductibles, as greater losses may be anticipated.
It's important to note that earthquake insurance deductibles are usually separate from the deductible for other perils, such as fire or theft, covered by your homeowner's insurance policy. This means that earthquake damage may have its own, higher deductible. When shopping for earthquake insurance, it's essential to consider the coverage limits and how they align with the potential losses you could face.
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Coverage for dwellings and personal property
Earthquake insurance is an optional coverage that offers protection against the damage that an earthquake can cause to your home and property. Standard homeowners insurance or renters insurance policies do not typically cover earthquake damage, and earthquake insurance must be purchased separately.
The California Earthquake Authority (CEA) provides most earthquake insurance in California and offers flexible plans and deductibles for homeowners. The CEA Homeowners Choice policy allows for separate coverage for dwellings and personal property, with different deductibles. The dwelling coverage, also known as Coverage A, helps pay to repair or rebuild your home after earthquake damage. The limit on earthquake insurance dwelling coverage is typically the same as the limit on your homeowners insurance.
Personal property coverage, also referred to as Coverage C, helps pay for the replacement of personal items damaged or lost during an earthquake, such as furniture, appliances, clothing, and jewellery. Some items have "special limits", where the policy will only pay up to a specific amount.
It is important to note that earthquake insurance does not cover every type of damage. For example, it typically does not include water damage, masonry, pools, fences, or separate buildings. Additionally, most insurance companies will not sell earthquake coverage immediately after an earthquake, and premiums may be higher when they resume sales.
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Earthquake insurance costs
Earthquake insurance is not mandatory, but depending on where you live, your home might be at risk of suffering irreparable damage. Earthquake insurance offers coverage for your house and belongings if they are damaged or destroyed in an earthquake. A standard homeowners insurance policy doesn't cover earthquake damage, as earthquakes aren’t covered by hazard insurance. If your house and belongings are damaged in an earthquake, you will have to pay for the repairs yourself if you don’t have earthquake insurance.
The cost of earthquake insurance depends on factors like where you live and your home’s features. The key factors that determine your earthquake insurance rate include your home’s proximity to fault lines, its age, its construction style, and the amount of coverage you need. The average cost of earthquake insurance in the US is $800 per year, but this can range from less than $300 to more than $1,300 per year. In California, the average cost is $739 per year, but it can range from $1,248 to $2,744 annually for $500,000 of coverage.
To lower your earthquake insurance costs, you can retrofit your home for earthquake safety, which can result in a discount of between 10% and 25%. The average cost of retrofitting a home ranges from about $3,500 to $8,700. Depending on your income and location, you might be eligible for a grant to help cover these costs.
It’s important to note that earthquake insurance deductibles tend to be high, ranging from 2% to 25% of your coverage limit. This means that you’ll have to spend a lot of your own money before the insurance kicks in. For example, if you have a dwelling coverage limit of $200,000 and a 20% deductible, you would be responsible for paying $40,000 before your insurance starts paying out.
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Earthquake insurance providers
Earthquake insurance is an optional coverage that offers financial protection for your home and belongings in case of damage or destruction caused by an earthquake. Standard homeowners, condo, or renters insurance policies typically exclude earthquake damage, leaving individuals vulnerable to costly repairs.
California Earthquake Authority (CEA)
The California Earthquake Authority (CEA) is the primary provider of earthquake insurance in California. They offer policies for homeowners, mobile home owners, condo unit owners, and renters. CEA policies are purchased through member insurance companies, and you must have a residential property insurance policy in place to obtain earthquake coverage. CEA provides basic coverage with deductibles ranging from 5% to 25%, excluding landscaping, pools, fences, masonry, and separate buildings. Their Homeowners Choice policy allows for separate coverage and deductibles for dwellings and personal property. Condo unit owners can benefit from up to $100,000 in coverage for certain assessments related to earthquake damage.
GeoVera Insurance
GeoVera Insurance offers residential earthquake insurance in California, Oregon, and Washington. They are recognised for their user-friendly online experience, allowing individuals to obtain free quotes without agent interaction.
Arrowhead General Insurance Agency, Inc.
Arrowhead provides residential earthquake insurance in California, Oregon, and Washington, filling a gap in the market for reasonably priced, high-quality coverage. Their program offers broader coverage, higher limits, and lower deductibles, with rates varying based on location and dwelling age.
Farmers Insurance
Farmers Insurance offers optional earthquake insurance in most areas, which can be added to existing home insurance policies. They serve as agents for the California Earthquake Authority in California, assisting individuals in understanding their coverage options and costs.
When considering earthquake insurance, it is essential to carefully review the policy's exclusions and limits. Costs can vary depending on factors such as coverage amount, home risk, construction materials, and location. Shopping around, comparing quotes, and exploring options like seismic retrofits can help in obtaining more affordable coverage.
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Earthquake damage exclusions
Earthquake insurance is an optional coverage that provides protection against damage to your home and property caused by an earthquake or earth movement, such as a landslide. However, it is essential to understand that earthquake insurance has several exclusions and limitations. Standard homeowners' insurance policies typically exclude earthquake damage, and earthquake insurance must be purchased separately. Here are some common earthquake damage exclusions:
Exclusion 1: Water Damage
External water damage caused by flooding, tsunamis, or sewer and drain backup resulting from an earthquake is generally excluded from earthquake insurance policies. To obtain coverage for such damage, a separate flood insurance policy is required.
Exclusion 2: Land Damage
Earthquake insurance typically does not cover damage to the land, such as sinkholes, erosion, or other hidden openings that may occur on your property. However, limited additional coverage may be available to restore or stabilise the land.
Exclusion 3: Vehicles
Damage to vehicles is usually excluded from earthquake insurance. Vehicle owners should refer to their auto insurance policies to determine if earthquake-related damage is covered under their specific plans.
Exclusion 4: Masonry Veneer
Many earthquake insurance policies do not cover masonry veneer, which refers to the brick or stonework on the exterior of a house. If your home features masonry veneer, be sure to clarify with your insurer whether it is covered, as the cost of repairs may be significantly higher if rebuilding with these materials is required.
Exclusion 5: Underground Structures and Equipment
Underground structures and equipment outside the foundation wall of the dwelling, such as wells, irrigation systems, underground pipes, cables, and drains, are commonly excluded from earthquake insurance coverage.
Exclusion 6: Decorative Items and Works of Art
Earthquake insurance policies typically do not cover damage to decorative items or works of art, including murals, sculptures, fountains, aquariums, stained or leaded glass, mirrors, and chandeliers.
It is important to carefully review your specific earthquake insurance policy, as exclusions and coverage limits can vary. Understanding these exclusions will help you make informed decisions about your insurance needs and ensure you have adequate protection in the event of an earthquake.
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Frequently asked questions
Earthquake insurance offers coverage for your house and belongings if they are damaged or destroyed in an earthquake. Earthquake insurance is separate from standard homeowners or renters insurance and is not a requirement.
Earthquake insurance covers some of the losses and damage that earthquakes can cause to your home, belongings, and other buildings on your property. This includes damage from aftershocks that happen within 72 hours of the earthquake.
Earthquake insurance deductibles vary by insurer. The cost of earthquake insurance depends on the amount of coverage you need, the home's risk, and other factors. On average, homeowners in California pay around $739 per year for earthquake insurance.
Earthquake insurance is worth considering if you live in an area at risk for earthquakes. While earthquake insurance can be costly, the financial impact of an earthquake without insurance could be devastating.
You can purchase earthquake insurance as a standalone policy or as an add-on to your existing homeowners insurance. Contact your current homeowners insurance company to inquire about earthquake coverage options. If they do not offer earthquake insurance, they may refer you to an insurer that does.
