- Home/Property Insurance

Earthquake Insurance

Damage to buildings and contents from earthquakes and other earth movements is not covered by standard homeowner or tenant insurance. An earthquake endorsement added to your policy provides coverage for damage resulting from any kind of earth movement: rising, sinking or contracting, including mudslides, landslides and sinkholes. Damages from flooding or tidal waves, even as a result of earthquakes, need to be separately covered by flood insurance.

When evaluating whether you need earthquake insurance you need to consider how likely an earthquake or other earth movement is in your area, how much damage it might cause to your property and how much you can afford to lose. If you are a homeowner or business owner, consider how much equity you have in your home or business. Could you afford to lose this if the building was destroyed? Even if your home or business is destroyed, you still need to repay your existing mortgage or line of credit. Could you afford to do this while paying to rebuild? Could you afford to replace your possessions, including furniture and appliances if they were damaged or destroyed in an earthquake? Earthquake insurance may also cover you for the cost of temporary accommodations if you are unable to live in your home after an earthquake.

Some people think that government disaster-relief programs will pay for their repairs, rebuilding and replacement, but these relief programs are only intended to assist you with low interest loans or aid, not to replace your home and contents.

Earthquake insurance is designed to protect you from catastrophic loss and most policies have high deductibles usually ranging from 5% to 25% of the policy’s value. Some policies treat the building and contents separately and apply the deductible to each part of the claim.

Your rates will vary depending on your area (assessed on a scale of 1 to 5 for likelihood of an earthquake) and the age and type of building. Generally, newer buildings are cheaper than older ones to insure, and wood structures have lower rates than brick ones. Some insurance companies will require you to make improvements to your buildings in order to be covered by earthquake insurance or to reduce your rates. These improvements can include: bolting your home to its foundation, bracing interior walls and securing fixtures such as water heaters.

Earthquake insurance policies differ so you should carefully check for any exclusions or limitations to coverage and make sure that the policy suits your needs. Some policies (such as the “mini-policy” in California) just cover the main building, while others also include unattached structures like garages, pools, sheds, driveways and retaining walls. Check the policy’s time limit for making claims, as some earthquake damage may not be immediately obvious.