Do I Need Earthquake Insurance Coverage?

If you do not live in an earthquake-prone region or state, you may believe that this type of insurance coverage does not apply to you. However, an earthquake can occur in any of the 50 states—the USGS even reports that 42 states are at risk for seismic activity. After an earthquake, structural damage, power outages, fires, and water damage are just a few of the hazards that can occur—and the damage can be catastrophic.

Want to make sure your home and financial assets are safe in the event of a natural disaster? Continue reading to learn how earthquake insurance can provide you with peace of mind when you need it the most.

What is Earthquake Insurance?

Earthquake insurance is a type of coverage that compensates you for damages and other losses caused by a major earthquake. First, it covers the cost of repairing or replacing your home and belongings. If the earthquake caused significant damage to your home, your policy may also cover temporary living expenses (hotel stays, restaurant meals, and so on) while your home is being repaired.

Because a standard homeowners insurance policy does not cover earthquake damage, if you live in a high-risk area prone to dangerous seismic activity, you should strongly consider purchasing earthquake insurance.

Do I Need Earthquake Insurance?

It should come as no surprise that California is responsible for roughly two-thirds of the country's earthquake risk. However, some of the most common seismic activity occurs in the central United States. Oklahoma and Texas have seen an increase in earthquakes in recent years, most likely as a result of increased hydraulic fracturing, or fracking. In fact, Oklahoma had the highest number of earthquakes in the country in 2015.

The United States Geological Survey can assist you in tracking your state's tremor timeline. If you live in California, Oklahoma, Texas, or any other earthquake-prone state and are unsure about getting coverage, consider the following:

Will you be able to repair or rebuild your home if a major earthquake strikes?
Can you afford to replace all of your belongings if an earthquake destroys them?
Do you have the financial resources to live somewhere else for an extended period of time while your house is being rebuilt following an earthquake?

Where Can I Buy Earthquake Insurance?

In California, home insurance companies are required by law to provide earthquake coverage, which is available to Golden State residents through the California Earthquake Authority (CEA).

If you live elsewhere and need to open an earthquake insurance policy, begin by contacting your current homeowners or renters insurance provider. Many insurance companies offer earthquake protection as an add-on to your policy, which extends your home insurance to cover earthquake damage for a fee.

If your current insurer does not provide earthquake coverage, you will need to look for a separate policy from a company that does. The website of your state's Department of Insurance can also be used to locate licensed earthquake insurers. However, keep in mind that if an earthquake has recently occurred in your area, insurers will typically not sell new policies for one or two months.

What Does Earthquake Insurance Cover?

Earthquake insurance typically only covers direct property damage caused by an earthquake's shaking. It may also cover damage resulting from a volcanic eruption triggered by an earthquake.

Indirect damage, such as fire and water damage from burst gas and water pipes, is covered by a homeowners policy. If your home is damaged by an earthquake and you don't have this coverage, you'll almost certainly have to pay for repairs out of pocket.

There are four major components to earthquake coverage, which are as follows:

Dwelling coverage: This section of your policy protects your home by paying to rebuild or repair it if it is damaged or destroyed by an earthquake.
Other structures coverage: Do you have any other structures on your property, such as a detached shed, garage, or fence? This section of your policy protects any structures that may be harmed by an earthquake.
Personal property coverage: As the name implies, this coverage protects your belongings, such as furniture, clothing, and appliances.
Additional living expense coverage: If you can't live in your home while it's being repaired, this portion of your insurance will pay for hotel stays or transportation until it's safe to return.

What Does Earthquake Insurance Not Cover?

As previously stated, earthquake insurance typically only pays for damages caused by earthquakes or volcanic eruptions that occur as a direct result of an earthquake.

Even if the disaster was caused by an earthquake, a different type of natural disaster, such as a fire, flood, or sinkhole, will be covered by home insurance and flood insurance.

Earthquake coverage will also not pay if your vehicle is destroyed or damaged as a result of seismic activity. In this case, your auto insurance will cover any damage to your vehicle.

Finally, certain items or materials are typically not covered by earthquake insurance. These may include, depending on your policy:

Masonry (the brick, rock, or stone used for the exterior of your home)
Pools
Fences
Vehicles
Fixtures and breakable items (such chandeliers or china)

How Much Does Earthquake Insurance Cost?

The cost of car insurance can vary greatly depending on where you live and how your house is constructed. In California, for example, the average cost of a policy is $800 per year—but if you live in a lower risk state, you may only pay a few hundred dollars in annual premiums. A masonry home (made of brick, rock, or stone) on the other hand, can cost thousands of dollars per year to insure, especially if it's near an active fault.

Aside from the amount of coverage in your policy and the policy deductible, the following factors influence your monthly premium:

Your home’s location
Your residence's age
The number of stories in your house
The cost of rebuilding your home
Your property's soil type
The materials used in the construction of your home
The proximity of fault lines and seismic activity in your area

How Do Earthquake Insurance Deductibles Work?

When you file an earthquake damage claim for your home or personal property, you must pay a deductible—the amount you pay out of pocket before your insurance kicks in.

However, earthquake insurance deductibles are frequently handled differently than, say, homeowners insurance deductibles. While most home insurance policies have a single deductible that applies to the majority of your structures and possessions, some earthquake insurance companies use separate deductibles for the dwelling and personal property parts of the policy.

For example, if you choose $200,000 of dwelling coverage with a 10% deductible, $20,000 will be deducted from the reimbursement for repairing or rebuilding your home. If, on the other hand, your personal property coverage limit was $50,000 with the same deductible, your settlement would be reduced by $4,000 to cover the cost of replacing your possessions.

When looking for a provider, make sure to ask if they have a single overall deductible or separate deductibles for dwelling and personal property coverage. If you have the option, a lower deductible will allow you to get the most out of your policy if you ever need to file a claim, though you will face higher rates. Most policies allow you to set your deductible at 5%, 10%, 15%, 20%, or 25% of the dwelling coverage limit, or the amount your house is insured for.

See How Much You Can Save on Earthquake Insurance

Protecting your home from natural disasters is essential no matter where you live, but it's especially important if you live in an earthquake-prone area. You can choose an earthquake insurance plan and get coverage in minutes thanks to our quick and affordable home online Insuroma quotes. Get your free quote today and have peace of mind knowing that you and your family are financially protected in the event of a disaster.