Earthquake insurance is an optional add-on you can put into your existing home insurance to cover your home from damages caused by an earthquake. Whether or not you need earthquake coverage is dependent on you and your home since this form of coverage is not required by law. To determine if you should be considering earthquake insurance, continue reading below.
- What is Earthquake Insurance – a specific insurance product that helps you financially recover from earthquake-related damage caused to your home
- Do you need Earthquake Coverage – in areas where earthquakes are a higher risk, it may be required. But not always.
- How does Earthquake Insurance work – for most policies, you pay a significantly higher deductible (around 15-20% of your coverage limit) before your insurance company pays out your claim
What is Earthquake Insurance?
As mentioned previously, earthquake insurance is coverage you can add onto your existing homeowners or renters insurance. It is meant to cover any rebuilding you may need to do for your home post-earthquake, cover any personal property that was lost or covers any living expenses you face after losing your home in an earthquake. Make sure to keep in mind that not all earthquake insurance providers offer the same form of coverage. Some are specialized in earthquake insurance and provide their insurance in-house while others offer their earthquake insurance through another company as an endorsement.
What Does Earthquake Insurance Cover?
There are three main types of earthquake insurance coverage options to be aware of. Each of these can be used as solo coverage or can be combined, depending on what you believe your needs and risk are in terms of earthquakes. It is important to remember that these forms of coverage only apply to damages caused by an earthquake – not wildfires, floods, or any other natural disaster that forms as a result of an earthquake. Below is more information on each of these types of coverage:
- Dwelling Coverage: This form of coverage is one of the most popular types of coverage. Dwelling Coverage is used to cover any property damage done to your home and its external structures, such as your swimming pool or driveway.
- Personal Property Coverage: Another common form of earthquake insurance is Personal Property Coverage. This coverage covers and reimburses you for any personal property that was lost as a result of an earthquake, including your damaged property.
- Loss of Use Coverage: Loss of Use Coverage, also known as Additional Living Expenses, is used to reimburse a homeowner who has lost their home as a result of an earthquake. This coverage can be applied to expenses that occur when renting out a hotel room while waiting for your home to be fixed or while looking for a new home.
How Earthquake Insurance Deductibles Work
Earthquake insurance comes with deductibles just as any other insurance would. Typically, these deductibles have a higher average than standard insurances and range between 15% – 20% of your coverage. This amount will need to be paid out-of-pocket by the homeowner and then the insurance will cover the rest.
For example, let’s take a look at what would happen if you have dwelling coverage that covers $100,000 with a 15% deductible and you have an earthquake that damages $100,000 worth of property. You will need to pay 15% of the $100,000 which is $15,000 and your insurance provider will cover the rest of the $85,000 to cover the rest of the damages.
Who Needs Earthquake Insurance?
If you live in a high-risk area that is prone not only to earthquakes, but fault-line quakes and man-made quakes, it is highly recommended to obtain earthquake insurance and in some areas, may even be required by law. A fault-line quake are quakes caused by the disruption and dislocation of sedentary materials, such as large rock structures, canyons, etc. A man-made quake may happen near large construction projects, dams, etc. that can be large enough to disrupt your home. Here are some factors that may make your home a high-risk area or a high-risk home:
- The home’s proximity to a seismic zone
- The home’s age
- The foundation and construction type
- The deductible a homeowner chooses
- The cost to rebuild a home
- Any additional coverage (such as secondary structures)
Ultimately, it is up to you, the homeowner, whether or not you believe earthquake insurance is right for you. Where you live, how close you are to at-risk zones, certain architectural features around you, and other factors should all be determined when determining how prone your home is to earthquakes. Once you balance out the risk factors and determine whether you believe earthquake insurance is necessary for your home, make sure to assess all of the earthquake insurers in your area to find the one that would be the perfect fit for your home and budget. When making this decision, always make sure to think about the potential benefits earthquake insurance may save you in the long-run – not just the risks.