Earthquake Insurance: Is It Worth It?

Homeowners insurance can be a lifesaver in many situations, but it doesn’t cover everything. Among the excluded events are earthquakes.

To protect your property and belongings, you’ll need a standalone earthquake insurance policy or a rider on your existing home policy.

A policy can cost thousands of dollars a year, though — and may not cover all of the damage — so you need to decide if the risk of losing your home is worth the price.

Like a regular homeowners policy, earthquake insurance covers your home’s structure and contents as well as living expenses if you have to evacuate

• Dwelling coverage. Pays to repair or rebuild your home after an earthquake, including attached structures like a garage.
• Other structures. Pays for repairs to barns, sheds and other detached structures.
• Personal property. Pays for damage to your electronics, furniture, appliances and other belongings,
• Additional living expenses. Provides reimbursement for food, lodging and other expenses If you can’t live in your home while repairs are being made.
• Emergency repairs. Covers immediate repairs that need to be done to your home or property to prevent additional damage or protect your property
• Building code upgrades. If your house is older, this coverage helps to cover the cost of upgrades to bring the property up to code.

Most earthquake policies also cover debris cleanup and removal, loss assessment for condo owners and land restoration and stabilization.

Not everything is covered by earthquake insurance: Two prime examples are a fire started by a quake, which is covered by your home policy, and damage to your car, which you would need comprehensive auto insurance to cover.

Flooding is a tricky topic. If an earthquake causes flooding from water inside your home, like a burst pipe, it’s covered by your homeowners policy. If it’s water from outside your home, like a damaged water main, you would need flood insurance.

Earthquake insurance also typically doesn’t cover:

• Vehicles
• Water systems
• Landscaping
• Fences
• Swimming pools and hot tubs

The cost of earthquake insurance is usually represented by how much it costs to cover $1,000 of your property’s total value: A brick home in Oregon could cost $3 to $15 per $1,000 in coverage, according to the Insurance Information Institute (III), compared to 90 cents per $1,000 in New York state.

For a house in a quake-prone area, you could easily pay $1,500 to $3,000 a year for $300,000 worth of coverage.

In California, coverage is overseen by the California Earthquake Authority (CEA), which requires all private insurers offer earthquake coverage as an add-on.

Policies are offered at a discounted rate that averages about $739 a year, but the CEA’s premium calculator can help you estimate what your specific rate will be.

Quakes can happen anywhere, according to the U.S. Geological Survey (USGS), but they’re more likely in areas located along fault lines.

The Circum-Pacific seismic belt, also known as the Ring of Fire, is a horseshoe-shaped zone tracing the edge of several tectonic plates. It’s responsible for roughly 80% of the world’s largest earthquakes, according to the USGS, and, in the U.S., the Ring of Fire puts California, Oregon and Washington at risk, as well as Alaska and Hawaii.

In the Midwest, the intersection of Missouri, Illinois, Western Kentucky, Tennessee and Northern Arkansas is also a high-risk region.

Since 2009, Oklahoma has seen a surge in earthquakes caused by wastewater injection practices associated with oil and gas production.

You can check the earthquake risk in your state on the USGS website, but the agency also recommends considering your home’s construction materials, any earthquake-mitigation features, and the characteristics of your lot — including whether there’s a slope or a lot of rainfall.

Am I entitled to disaster relief?

In the wake of a major earthquake, financial assistance may be available from the Federal Emergency Management Agency (FEMA).

Keep in mind, FEMA only provides $42,500 in housing assistance, which may not be enough to cover repairs.

Can I afford it?

If you think you’re at risk, get rate quotes from several providers, including your current homeowner insurance provider, to see if you can afford a policy. With coverage ranging from a few hundred to several thousand dollars a year, it may just not be in your budget.

Keep in mind, earthquake policies can have high deductibles, often 10% to 25% of your home’s insured value. For a home insured for $500,000, a 10% deductible would mean $50,000 out of pocket before your provider paid for anything. With a 25% deductible, you’re looking at $125,000.

Major homeowners insurance companies offer earthquake insurance, including Amica, Farmers, Foremost, State Farm and USAA.

An earthquake rider is significantly cheaper, but coverage limits may be lower, there are more exclusions and deductibles are usually higher.

In California, the CEA requires deductibles to start at 5%, but standalone policies can be as low as 2.5%.

Get standalone earthquake insurance

A separate earthquake policy can offer higher coverage limits and include things usually excluded on riders, like swimming pools and older homes.

Palomar offers policies for single-family homes and condos in 17 U.S. states, with deductibles as low as 2.5%.

GeoVera only issues policies in California, Oregon and Washington state, but it pays out more for rebuilding if costs surge after a quake.

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