Approximately 55 earthquakes are detected each day in the United States. The majority are magnitude 3 or less or occur in unpopulated areas, but it demonstrates just how common earth movement events actually are. There are about 60 major earthquakes per year, and these natural disasters are costly. For homeowners, the potential damage from earthquakes can range from cosmetic cracks to ruptured plumbing and structural damage. Windows may shatter, and personal belongings may be crushed or broken.
Many homeowners in the states most affected by earthquakes purchase earthquake insurance. This helps cover damages and losses to your home and belongings if they are damaged in an earthquake, and some policies also cover the costs of temporary relocation and living expenses. Earthquake insurance is not included in standard homeowner’s insurance policies and must be purchased separately.
Is Earthquake Insurance Mandatory?
Earthquake insurance is not mandatory. However, standard homeowner or business insurance policies do not cover earthquake damages and losses. Instead, coverage can be purchased as an add-on endorsement to an existing homeowner’s insurance policy or separately as a stand-alone plan.
Earthquake coverage can provide significant financial protection. The Federal Emergency Management Agency (FEMA) estimates annual losses due to earthquakes at over $4 billion. The vast majority of this is in California, with an estimated $3.3 billion of losses annually. Outside of California, earthquake activity is largely concentrated in Alaska, Hawaii, Idaho, Nevada, Oklahoma, Texas, Utah, Washington, and Wyoming.
Earthquakes are also not always natural disasters. In 2016, an earthquake over 5.0 in magnitude that caused significant damages to homes and businesses in Oklahoma was determined to be man-made; Eagle Road Oil LLC paid out $850,000 in damages as a result.
Earthquake Insurance For California Homeowners
While Alaska detects the highest number of earthquakes out of all the U.S. states, many of them occur in areas that are not densely populated, and so are less prone to cause property damage. On the other hand, 65% of the earthquakes in the contiguous United States take place in California, which is densely populated and so more likely to suffer from significant property losses.
To protect home and business owners, California has its own robust earthquake insurance program, but coverage is not mandatory. The California Earthquake Authority (CEA) offers policies through participating insurance companies, and it is the largest earthquake insurance provider in the country. Residents of California may also purchase earthquake insurance policies through their current standard homeowner’s insurance provider.
What Does Earthquake Insurance Cover?
While earthquake insurance policies vary in their details, there is general coverage you can expect or ask about when purchasing a policy.
- Dwelling: Dwelling coverage helps to pay for the cost of repairing or rebuilding your home. Building code upgrades may be included with dwelling coverage, or it may be available as an add-on. This covers the extra expense of bringing your home up to current building codes while addressing the damages, an important consideration if your home was built before the current standards were passed as law.
- Other Structures: This refers to the coverage of structures on your property that are not part of your main home, such as detached garages and apartments, workshops and storage sheds, gazebos, and pump houses.
- Personal Property: While dwelling coverage addresses the actual structure of your home, such as its walls, floors, and roof, personal property coverage helps to cover the cost of replacing damaged items inside your home. This typically includes appliances, furniture, and other personal items up to your policy’s limits.
- Loss of Use: In the event you are unable to stay in your home because of the extent of the damage, loss of use coverage reimburses you for living expenses that go beyond your usual cost of living while your home is repaired. For example, it may cover hotel stays or meals you had to pay for while your home was uninhabitable.
It is important to discuss the details and not assume everything is covered. As an example, some homes have brick or stone veneers, and since these veneers are not structural, they are easily damaged by even relatively minor earthquakes. However, some policies may not cover them or cover them at an additional cost.
What Does Earthquake Insurance Not Cover?
Earthquake insurance does not provide blanket coverage for all types of damage caused by earthquakes. Instead, some specific damages are covered by another policy even if the initial trigger was an earthquake. These are some common damages that even if initially caused by an earthquake are ultimately covered by a separate insurance policy:
- Water damage: Earthquakes can trigger water damage, but the exact source and cause are important to determining coverage. If pipes burst due to the quake and flood your home, homeowner’s insurance or flood insurance may be the coverage needed. However, if the water comes from city pipes located outside of your home or from groundwater flooding into your home from an outside source, then earthquake insurance may cover it.
- Fire damage: If an earthquake causes an electrical or gas fire in your home, your homeowner’s insurance would cover the damages.
- Auto damage: If an earthquake causes damage to your car, your earthquake insurance policy will not cover it. Instead, you may need comprehensive car insurance to cover repairs or replacement of your car.
In addition, some specific structures may be excluded from earthquake insurance policies, such as underground structures, swimming pools, and recreational equipment.
How to Buy Earthquake Insurance
Earthquake insurance can be purchased as a stand-alone policy, meaning it does not have to be from the same insurer as your home insurance or renter’s insurance policy. Stand-alone policies could benefit those whose current home insurance company does not offer their own earthquake coverage through endorsements or add-ons.
Earthquake coverage can also be purchased as an endorsement or add-on to an existing home insurance policy if available. This effectively bundles your coverage, which may make paying premiums to keep your coverage active easier. It may also make filing claims after an earthquake easier, as you would follow the same claims process with your earthquake coverage and your homeowner’s insurance coverage.
Some states also have state-established organizations, such as California’s California Earthquake Authority, or CEA. The CEA provides the majority of the state’s earthquake insurance policies, though the individual policies are managed and run by private insurance companies that are CEA members. All CEA policies must be add-ons or endorsements to existing homeowners or renter’s policies.
How Much Does Earthquake Insurance Cost?
Earthquake insurance can be expensive, and the more likely you are to need it based on the history of earth movement in your area, the more it may cost you. Since insurance companies operate on a risk profile basis, the more prone your area is to earthquakes, the higher the premiums you can expect to pay. For example, you may pay $50 to $300 per year in Oklahoma, which is far from tectonic plate boundaries where most earthquake activity occurs. Meanwhile, earthquake insurance costs $200 to $300 each year in Oregon where the Cascadia Subduction Zone is relatively active.
The factors considered when determining earthquake insurance rates include:
- The value and age of your home
- Your home’s location in relation to existing fault lines
- Your state
- Your policy’s details, such as the amount of coverage and deductible
How to File an Earthquake Damage Claim
It is important that policyholders call their insurance agent or insurer as soon as possible after suffering earthquake damages. Follow the insurer’s claims process, where you will likely need to provide policy information and descriptions and photos of the damages.
Your insurance company will send a claims adjuster — either an employee or an independent contractor — to assess the damages to your home and belongings and determine the payment amount. You can likely provide more details to the adjuster during their visit about the items and structures that were destroyed or damaged.
What You Can Do to Protect Your Home Against Earthquake Damage
While you may not know when an earthquake might strike, there is much you can do to minimize or even prevent some of the damage earthquakes typically cause.
- Install break-away gas and water shut-off valves: These valves are tripped by earthquakes and seal off gas and water connections to prevent water and fire damage.
- Secure appliances: Many states now require hot water heaters to be strapped and secured, but many stoves, refrigerators, washers, and dryers also come with hardware to secure the appliance and prevent tipping during an earthquake.
- Make sure storage shelves are secure: Shelves can be anchored to the wall, and shelf designs that have a lip on the front edge can keep items from falling during more minor earthquakes.
- Apply a film to windows and glass doors: Applying film to glass can prevent it from shattering as it flexes during an earthquake, even if it breaks or cracks.
- Perform routine maintenance tasks in a timely manner: Home components that are well-maintained are less likely to fail during an earthquake. In addition, take care of things like landscaping, such as pruning tree branches that could break and fall on your roof or garage.