Earthquake Insurance – Is It Worth It?

You may think that you’re covered against natural disasters under your homeowners insurance policy. If you live in an area prone to earthquakes, however, any damage from a quake won’t be covered by your homeowners insurance. For protection against these events, you’ll need to buy earthquake insurance.

With that in mind, we’ve decided to take a closer look at these policies. Learn who should sign up for this insurance, what’s typically covered under a policy, what’s usually excluded and how rates are determined.

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      Do you need earthquake insurance?

      If you’re in a place that has a lot of earthquakes, earthquake coverage is vital. The table below shows the five states that experience the most earthquakes on an annual basis:

      States with the most earthquakes
      Number of earthquakes per year
      Most common season
      Late summer/early fall

      Knowing that you’re in a high-risk area can help make the decision easier. However, earthquakes can happen anywhere and without warning, so it is wise to take some time to consider whether a policy would be useful to you.

      Who needs earthquake insurance?

      At the end of the day, the decision of whether to get earthquake insurance is a personal one. Those located close to the west coast of the United States are likely most at risk. However, recently, those along the New Madrid Fault line — including those who live in Missouri, Illinois, Tennessee, Arkansas, South Carolina, and Kentucky — may also want to consider getting a policy. Evaluate the risk for your area to see if you think an earthquake policy could be worth it.

      Who doesn’t need earthquake insurance?

      If you don’t live in a particularly earthquake-prone area, you likely won’t need to worry about getting an earthquake insurance policy. But, again, it’s all about making that personal risk assessment. If you choose not to get a policy, be aware that if an earthquake does damage your home, you could be paying for the cost to rebuild and to replace all of your belongings out of pocket.

      What kind of earthquake coverage is there?

      Earthquake insurance typically insures your home against seismic activity, which includes earthquakes, aftershocks and volcanic eruptions. These policies generally protect against any direct, physical losses related to these events.

      You’ll need to read over the exact details of any policies that you’re considering in order to see what will be covered. However, under a typical policy, you can expect to receive the following coverage:

      • The cost of rebuilding your home
      • Any personal property
      • Additional living expenses
      • Emergency repairs

      That said, the following elements are likely to be excluded from a typical policy. Check with your provider to see which ones apply to you:

      • Brick structures and other exterior masonry
      • Other exterior structures like detached garages and fences
      • Damage to vehicles

      How rates are determined

      For the most part, the rate for your earthquake insurance policy will be determined similarly to how it’s determined for a homeowners insurance policy. However, there are also a few other factors that will likely be taken into account.

      According to the National Association of Insurance Commissioners (NAIC), here are a few of the factors that will be considered:

      • The property’s proximity to a seismic zone
      • The property’s age
      • The property’s foundation and construction materials
      • The deductible you choose
      • The estimated cost to rebuild your home
      • Any additional coverage you’ve elected

      Out of all the factors listed above, your home’s proximity to a seismic zone will have the greatest impact on your rate. A spokesperson for USAA revealed that, in most states, the average cost for Earthquake insurance coverage ranges between $100-$300 annually. In states like California and Alaska where earthquakes are much more common, the average premium shoots up to $800 per year.

      Understanding your earthquake insurance deductibles

      Where insurance is concerned, a deductible is the amount that you, as the homeowner, are responsible for paying on each claim. After you pay that amount, your insurance policy will cover the rest of the cost.

      According to the NAIC, deducibles on earthquake insurance are typically expressed as a percentage of your coverage limit. You can expect to pay between 10%-20% of your limit. Additionally, unlike with a standard homeowners insurance policy, you may have to pay separate deductibles for the various parts of your policy. For instance, there may be separate deductibles for rebuilding your home and your personal belongings.

      To that end, if you have a policy with a coverage limit of $100,000 for rebuilding your home and you have a 20% deductible, you would be responsible for paying $20,000 toward any necessary, earthquake-related repairs. However, if you then had a $50,000 coverage limit for your personal belongings, you may have to pay an additional $10,000 towards those costs.