Updated: Apr 24, 2022
Why should you buy an Earthquake Insurance?
Earthquakes can occur anywhere and anytime and it's important to be prepared as an earthquake can cause a huge damage to the foundations of our home and make the home inhabitable. It is important to protect your home and loved ones in times of disaster. It helps protect your money you have invested if an earthquake damages it. If you don't have earthquake insurance and you experienced earthquake, then you may have to pay for the damages of your home, continue to pay for mortgage and pay for a new place to live in out of your pocket.
It can be added on as an Endorsement in your current Homeowners, condo or renters policy or it can be bought separately depending on the insurance providers. The standard homeowners, condo or renters policy does not cover the damages caused by Earthquake. If a fire is caused by an earthquake and the fire caused damage to the home, it might be covered in certain homeowners, condo or renters policy. Some mobile homeowners policy may include the coverage for the damage caused by earth movement.
How does the Policy work?
In Earthquake insurance, the deductibles usually tend to be high and it is even higher in areas which are closer to fault lines or which are considered as high risk areas. The cost of the policy usually depends on the
Age of your home
Square foot of your home
Foundation and any additional structures
Your home's proximity to the fault lines
Construction materials used in your home
Cost to rebuild your home
The cost of the policy is higher especially in the high earthquake prone areas. The limit covered by Earthquake insurance policy during earthquakes are usually up to the limit in the Homeowners policy.
All the insurance policies have deductibles (the amount you pay out of pocket before the insurance coverage kicks in). For earthquake insurance, the deductibles are usually higher where they range approximately from 10% - 20% depending on the factors such as location, insurance provider, coverage limit etc because they cause high risk for the finances of the insurance provider. The deductibles are especially higher in areas where earthquakes are high prone.
For example, If the cost to rebuild your home is $300,000 and you have a 15% deductible in your policy, then in the event of a claim, you have to pay $45,000 out of pocket. Only then the policy kicks in and they cover the rest $255,000.
What does it cover?
Earthquake insurance doesn't cover damages like water or fire damage and covers only the direct damage caused by the earth movement. Usually all the earthquake events that happen within a 72 hour period (3 days) are considered as a single event with one single claim and one set of deductibles. Damages and aftershocks that are caused after 72 hours after the first earthquake may be considered as a second claim with an another set of deductibles. The time period differs according to the policy. Some policies cover accommodation expenses such as hotels etc until the repairs are being done on the home.
Three areas that are usually covered in an earthquake insurance coverage are
Dwelling Coverage ( repair or build your home)
Personal Property or Personal belongings
Additional Living Expenses ( Living expenses for hotels etc until your home is being repaired)
Home Earthquake Insurance
It covers your home, garage and any other structures on your property, fences, driveway, permanent fixtures in your yard, personal property such as furniture, clothes etc, Attached structures like Garage.
Renters Earthquake Insurance
Earthquake insurance for renters doesn't include the building as they don't own the building. Renters insurance only includes the Personal property such as furniture, clothes and any alterations made in the home that the renter paid for.
Condo Earthquake Insurance
Condo earthquake insurance helps cover the condo unit, personal property such as furniture, clothes and any other permanent installations made such as appliances and fixtures, attached structures like garage. It might also cover Building Code Upgrades if rebuilding your home costs more because of the current compliance and those extra expenses may be covered by the insurance.
What is not covered?
If an earthquake causes fire in your home, it may be covered under your homeowners insurance.
Vehicle damage and repairs caused by earthquake may be covered under your auto insurance.
If an earthquake triggers flood and your home is damaged by flood, they are covered under your Flood Insurance.
A sewer or drain back up could be covered by Flood insurance even though they are caused by an earthquake.
Masonry such as brick, rock etc used for your home's veneer are not covered.
Retrofitting is a process of making changes in your home to increase the safety of your home against earthquakes. Insurance companies charge more if it is an old home, building does not meet the current codes, homes built with brick or masonry, foundation is in a sandy soil, has more than one story etc.
There are some ways you may retrofit your home.
Bolting the home to your foundation.
Bracing the water heater (attaching to a wall).
Bracing the chimney.
Cripple wall bracing.
In California, it is mandatory for a seller to give a Natural Hazard Disclosure (NHD) to the buyer while selling home if their home is located on a natural disasters like wildfires, floods, earthquakes prone area. Some earthquake insurers may require to do an inspection of your property before issuing the policy. The events and items covered by your insurance policy differs based on your policy and insurance provider. The conditions and limitations of the coverage vary upon your specific policy.