Earthquake Insurance 101
According to the United States Geological Survey (USGS), an estimated 20,000 earthquakes occur around the world each year, and sixteen of those earthquakes are considered to be “major” in terms of scale.
While not all of those earthquakes occur in the United States, the truth is that many do: 42 states are known to experience the occasional earthquake, with three states (California, Washington, and Missouri) being the most at risk.
And yet, many homeowners are unaware of the fact that most homeowners insurance policies do not cover damage or destruction caused by earthquakes. In order to be protected from the real, but unpredictable threat posed by earthquakes, homeowners must purchase a special form of insurance: Earthquake insurance.
Below, we take a closer look at what earthquake insurance is, what it covers, how it works, and who should consider purchasing it.
What is earthquake insurance?
Earthquake insurance is a specific type of insurance policy that is designed to provide coverage in the event that your home is damaged or destroyed by an earthquake or tremor. It can be purchased as a standalone policy in addition to your homeowners insurance, or potentially as a rider to your existing policy.
Even so-called “minor” earthquakes can cause extensive damage to a home. Tremors and shifting earth cause cracks or other structural damage to a home’s foundation, walls, pipes and sewer lines, and more. They can even trigger landslides in certain areas, which can prove truly catastrophic and require a home to be fully reconstructed.
Because homeowners insurance doesn’t cover damage caused by earthquakes, homeowners without earthquake insurance can find themselves paying tens or even hundreds of thousands of dollars out of pocket to fix the damage caused by an earthquake.
What does earthquake insurance cover?
Most earthquake insurance policies provide three forms of coverage: Dwelling coverage, personal property coverage, and loss of use coverage.
1. Dwelling Coverage
If your home becomes damaged due to an earthquake, dwelling coverage kicks in to cover repairs or reconstruction. Dwelling coverage may also provide coverage for extended structures, like a swimming pool or garage, but it’s important to understand what’s spelled out in your policy.
You may also be able to purchase a rider that provides “building code upgrade coverage.” This rider would provide additional coverage to rebuild your home after an earthquake in order to meet current building code requirements, which can be expensive.
2. Personal Property Coverage
If your personal property is damaged or destroyed due to an earthquake, personal property coverage will kick in to help you pay to either repair or replace the property. Clothing, furniture, and electronics such as a television are all examples of personal property that can be covered by earthquake insurance.
3. Loss of Use Coverage
If an earthquake causes extensive damage to your home to the point that you can no longer safely use it, loss of use coverage will kick in to help you afford a new place to stay, such as a hotel.
What is not covered by earthquake insurance?
An earthquake can sometimes trigger other events, such as flooding or tsunami damage (in certain areas) which would not typically be covered by your earthquake insurance policy. Damage from those types of events would instead be covered by flood insurance, which must be purchased separately.
Additionally, certain items may not be covered by your earthquake insurance policy. Vehicles, for example, will not be covered by most standard earthquake insurance policies, though it is possible to have coverage through your auto insurance policy.
Likewise, if an earthquake were to cause a fire in your home, that damage would typically be covered by your homeowners insurance policy — not your earthquake insurance policy.
How does earthquake insurance work?
Earthquake insurance will typically work something like this:
- When you decide to purchase earthquake insurance, you will need to apply through a carrier. Depending on the insurer, you may be able to purchase earthquake insurance through the same company as your homeowners insurance. You can also purchase earthquake insurance as a standalone policy through a different carrier if you prefer.
- In order to purchase earthquake insurance, your insurer may require an inspection of your property.
- Once you purchase earthquake insurance and your policy is activated, you will have coverage.
- In the event that your home is damaged during an earthquake, you will submit a claim to your carrier.
- You’ll need to pay out of pocket to cover your deductible, at which point your policy will kick in to cover the remainder (up to your policy limits).
Who needs earthquake insurance?
Purchasing earthquake insurance is an excellent way of protecting yourself and your family against the potentially catastrophic risk posed by an earthquake. Not sure whether or not it makes sense for you? Ask yourself the questions below to get a better sense of whether or not you should purchase earthquake insurance:
- Does your homeowners insurance policy cover earthquake damage? While it is uncommon for homeowners insurance policies to cover earthquake damage, some still do. Before purchasing additional coverage, it’s a good idea to check with your carrier to determine whether or not you are already protected.
- Do you live in an at-risk area? As mentioned above, there are 42 states that are at risk of the occasional earthquake. That being said, certain states are at a much greater risk of earthquakes than others. According to FEMA, California experiences 90 percent of all earthquakes that occur in the United States. Other states considered to be higher risk include Washington, Oregon, Alaska, Missouri, Montana, Tennessee, Wyoming, and Hawaii.
- Could you afford to rebuild without the help of earthquake insurance? If repairing or rebuilding your home after extensive earthquake damage would be difficult or impossible due to a lack of savings, etc., then purchasing coverage can be a wise decision that puts your mind at ease.
- Was your home built to be earthquake resilient? Modern architects are guided by a particular set of practices and regulations that help structures be more resilient to earthquake damage. If your home was built to be earthquake resilient, it may reduce (but not fully eliminate) your need for earthquake insurance.
Here at Matic, our goal is to make it as easy as possible for homeowners to purchase the exact right insurance policy to put their minds at ease in an unpredictable world. Whether you are looking for earthquake insurance, umbrella insurance, homeowners insurance, or auto insurance, all it takes is answering a few simple questions and you can have a personalized quote for an affordable policy.