We looked at several earthquake policies in different states to compile this summary of common coverages, exclusions and things to know.
On the surface, earthquake insurance could make sense: If a quake knocks down your house and destroys your belongings, you want insurance, right? But when you start looking at the exclusions and limits on coverage, earthquake insurance might not seem like so sensible.
Home insurance does not generally cover earthquake damage, so you'll need a separate earthquake policy if you want insurance for this type of disaster. Note that earthquake policies do not mirror home insurance coverage. The items covered and limits can be quite different. If you're considering buying an earthquake policy, it's important to read all the fine print.
What's typically covered:
- The dwelling.
- "Other structures."
- Personal property.
- Loss of use, meaning extra expenses you have if you can't live at home due to an earthquake.
- Debris removal of damaged property.
- Costs to bring the property up to code during reconstruction.
- Loss assessments you have to pay due to an earthquake, such as a loss assessment against members of a homeowners association.
Make sure you're aware of the policy's payment limits for each. For example, the maximum coverage for a dwelling might be lower than the actual cost to rebuild your house.
What's usually not covered:
- Lawns, plants, trees and shrubs
- The value of the land
- Structures used for business or rented out to other people
- Underground structures such as pipes, cables and drains
- Awnings and satellite dishes
- Coin and stamp collections
- Loss of market value to your house due to the earthquake
- Animals, birds and fish
- Motor vehicles and boats/watercraft
- Things outside such as playground equipment, gazebos and equipment sheds
- Property that wasn't maintained in good or working condition
- Property that didn't belong to you
Swimming pools, spas, hot tubs and fish ponds might also be excluded from coverage, or have a special limit on repairs. We saw both approaches in our analysis of earthquake insurance policies.
Check the policy for special limits on certain items so you're not caught by surprise if you have an earthquake claim. Things that might have limited coverage include:
- Chimney repair
- Driveways and sidewalks
- Retaining walls
- Possessions such as computer equipment, jewelry, silverware, crystal, china, fine art, sports equipment, guns and more
- Structural engineering costs you have in order to determine if you can live in the house, but not including those provided by public entities like a local government
Be aware that earthquake insurance in California is usually purchased through the California Earthquake Authority, which has its own coverage rules.
Comparing personal earthquake insurance policies
We found a wide variety of exclusions and special limits on coverage among policies. If you're looking to buy earthquake insurance, look at least a few options and try to compare specific items that are excluded or limited. For example:
- Look at the big picture for the limits for your dwelling (house), contents (possessions) and loss of use (additional living expenses if you can't live at home due to quake damage). We saw policies that limited dwelling coverage to $25,000 and contents coverage to $5,000 and loss of use to $1,500. That won't go very far.
- Check deductibles and calculate the dollar amount you'd have to absorb in the event of an earthquake claim.
- Note limits on specific items. For example, if you have swimming pool, note which policies exclude pools and what the limit is with other policies. If you have chimney, note the limits on chimney repair.
Check to see what other disasters could let an earthquake insurer off the hook
Some earthquake insurance policies list related problems that will mean you aren't covered if they happen at the same time as the earthquake, or right before or after the earthquake. These could include:
- Fire. Although homeowners insurance typically covers fire damage.
- Other earth movement. This can include landslides, mudflows, sinkholes and volcanic eruptions.
- Water damage such as a tidal wave or tsunami.
- An explosion. But typically covered under a home insurance policy.
- Your own failure to try to save property at the time of the quake, which the policy might refer to as "neglect."
- War, nuclear hazard or pollution.
The policy might specify what you have to do right after an earthquake in order to make a claim. You'll want to know this before a quake strikes so you're not digging through rubble to find your policy. An earthquake insurance policy might require you to:
- Notify your insurer right away
- Protect the property from further damage
- Save all damaged property. Don't start putting things on the curb for the trash collector!
- Keep a good record of repair expenses
- Provide an inventory of all damaged property, including bills and receipts that show values
- Provide receipts for all additional living expenses, such as hotel and restaurant bills (for a "loss of use" claim)
- Provide documents the insurer requests, which could include banking and financial documents
- Even testify under oath about your claim
Factors in earthquake insurance rates
Here are typical factors and discounts used to calculate rates:
- The location of the house, including the intensity of shaking expected at the location. The Modified Mercalli Intensity Scale defines levels of shaking.
- Age of the house: Older homes will generally cost more to insure.
- Number of stories: Single-story houses tend to be the cheaper for earthquake insurance; split levels can be the most expensive.
- The grade, or slope, under the house.
- Foundation type. For example, an insurance filing from GeoVera shows a post-and-pier or stilt construction to be more expensive to insure than a concrete slab foundation.
- Whether you've retrofitted the house to withstand against earthquakes better.
- Whether the water heater is braced with metal straps.
Earthquake insurance deductiblesA deductible is the amount subtracted from an insurance claims check. You can get lower rates by choosing a higher deductible. That's because the insurer will pay less for a claim.
Earthquake deductibles are generally a percentage of the dwelling coverage, such as 5%, 10%, 15%, 20% or 25%. If your policy doesn't show what that dollar amount is, make sure to do the calculation. Even a 5% deductible on a house insured for $300,000 comes in at $15,000.
Inspections of the house
It's common for earthquake insurers to do an inspection before selling a new policy. They're looking for pre-existing visible damage to the property (so they don't pay for it in the future) and to verify information you put in the application. You may have to pay a fee for inspection. For example, Palomar Specialty Insurance Co. charges $33 for earthquake insurance inspections in Oklahoma to cover its cost.