There’s an alarming trend over the past few years of homeowners who assume that their homeowners insurance policy automatically covers all natural disasters like earthquakes. The problem? Most standard policies don’t cover any earthquake damage. If you don’t find this out until after the ground starts shaking, you may find yourself on the hook for a large and unexpected repair bill.
If you happen to live in an earthquake-prone area, this should raise some serious questions: Do I need earthquake insurance? Is earthquake insurance worth it? How much does earthquake insurance cost?
According to the Federal Emergency Management Agency (FEMA), earthquakes are estimated to cost the U.S. nearly $6.1 billion annually (2017). A lot of that total is the cost of damage to residential structures and property. Earthquake insurance may be able to help protect you and your family from footing a portion of that bill from this natural disaster.
What Does Earthquake Insurance Cover?
The exact coverage you get from earthquake insurance will depend on the provider you choose and the details of your plan. That being said, most earthquake insurance covers the damage costs caused by an earthquake and any aftershocks. Many plans cover the cost to rebuild, personal property damage, emergency repairs, and loss-of-use coverage.
- Dwelling coverage — The cost to repair or rebuild your home and extended structures damaged by the earthquake.
- Personal property — If your personal property inside your home or extended structures is damaged by the earthquake, it’s covered by most policies.
- Loss of use — If your family needs to move out of your house because of damage, your policy should cover many or all of those costs. This can include hotels, additional food costs, and other expenditures caused by the displacement.
- Emergency repairs — The cost of repairs that need to be done quickly in real-time to protect against damage from potential aftershocks.
- Vehicle damage — Your car would be covered under your vehicle insurance, not through earthquake insurance. As always, check your car insurance policy to ensure coverage.
- Other natural disasters — Most earthquake insurance policies only cover damage from earthquakes, not damage from floods, sinkholes, fires, etc.
- Other structures — Many earthquake policies don’t cover additional structures on your property, but you may be able to get them included if you talk with your insurer.
Should I Get Earthquake Insurance?
The answer to whether earthquake insurance is worth it depends on several different factors, including your financial situation (what you can afford), how earthquake-prone the area you live in is, and the value of your property, house, and belongings.
If you’re unable to afford the higher premiums that come with earthquake insurance, it’s probably not something you should or can get. If you can afford the premiums, you need to weigh the risk versus the protection by looking at your chances of an earthquake and what the potential damage cost would be. No one ever expects or plans on their home getting damaged by an earthquake.
When Not to Get Earthquake Insurance
While the only way to be truly protected from the costs of earthquake damage is to get earthquake insurance, there are situations where it might not be the best move for you. First, if you live in an area that’s not prone to seismic activity, you could consider foregoing coverage. Second, if you feel the cost of the insurance is not worth the risk it mitigates, it might not be the right fit.
Areas with the Most Seismic Activity
How Much Does Earthquake Insurance Cost?
According to insurance company Lemonade, the average cost of earthquake insurance in the U.S. is $800 per year. That’s about $66 per month. The actual rate you pay depends on where you live, how earthquake-prone the area is, the type of home you have, the value of your house and belongings, and the level of coverage you want.
For example, the average cost of insuring a single-family home in California is between $1,248 and $2,744 a year. This breaks down to about $104 to $228 monthly.
How deductibles work
Your deductible is the amount of damage costs you’re responsible for, even with insurance. With earthquake insurance, deductibles tend to be considerably higher than with other types of coverage. In other words, you still might be on the hook for a decent amount of money if your home or belongings are damaged by an earthquake.
The average deductible tends to be between 15% and 20% on many earthquake policies. What does this mean for you? If you file a claim for $100,000 and you have a 15% deductible, the insurance company will pay you $85,000. You’d be responsible for the additional $15,000 in damages out of pocket.
How Do I Get Earthquake Insurance?
When it comes to getting earthquake insurance, you’ve got several options to consider. The two main ways to get coverage are to add an endorsement to your existing homeowner’s insurance policy or purchase a policy independently. Each option comes with its own set of pros and cons.
When you purchase earthquake insurance as an endorsement on your existing policy, the process is much more streamlined. You’re working with a company you’re already doing business with and have already vetted for your home insurance needs. Cost-wise, things could go either way. You may be able to get a discount as an existing customer, or you may miss out on savings available through another company that offers better earthquake coverage.
By shopping elsewhere for your earthquake insurance, you give yourself the opportunity to get the best deal possible without feeling tied down to one company. However, you’re going to be working with a new insurer that you don’t have a history with. This will require you to do additional research to make sure the company is one worth working with.