Earthquakes can cause serious damage, putting your home in jeopardy and putting you at risk of expensive rebuild costs. Unfortunately, earthquake insurance isn’t covered by your standard homeowners insurance policy. Earthquake insurance isn’t required by states or most mortgage lenders, but if you live in an area where there’s lots of seismic activity, whether due to proximity to a fault line or hydraulic fracturing, you might want to consider it. The major drawback is the cost, so you have to weigh whether earthquake insurance is worth it.
All it takes is one catastrophic event to destroy your home and personal belongings, leaving you with nowhere to stay. But if you live in a state that experiences little to no earthquakes, earthquake insurance might not be worth it.
To help you make your decision, the This Old House Reviews Team has rounded up everything you need to know to determine if earthquake insurance is worth it. We examine coverage, costs, and more.
What is Earthquake Insurance?
Earthquake insurance can either be bought as an endorsement to your standard homeowners insurance policy or purchased individually from a statewide private agency. Many states that have frequent earthquakes have government resources available, like the California Earthquake Authority.
Some states are more at risk of seismic activity than others. The states that are most at risk include Alaska, California, Hawaii, Nevada, Oregon, and Washington, and more recently Oklahoma and Texas due to hydraulic fracturing.
Earthquake insurance only covers direct physical loss in a specified period of time—typically 72 hours—of seismic activity, including loss due to volcanic damage. There are three primary types of earthquake insurance coverage. Keep in mind that you might have to pay individual deductibles for each kind, unlike with homeowners insurance.
- Dwelling: Covers the cost of rebuilding the exterior and interior structure of your home, depending on construction materials. Usually, brick and stone masonry homes are excluded because they are at greater risk of damage.
- Personal property: Covers the cost to replace damaged or destroyed personal property, with special limits placed on valuables like jewelry, furs, and collectibles.
- Additional living expenses: Covers the cost of living outside of your home if it is temporarily uninhabitable, including accommodations, transportation, and dining.
There are a few additional coverages you might be able to purchase as endorsements.
- Building code upgrades
- Other structures, like detached garages or sheds
- Land repair
- Safety replacement upgrades
- Energy efficiency upgrades
- Emergency repairs
Do I Need Earthquake Insurance?
This will depend on several factors, primarily how at risk you are of earthquakes and whether you can afford the cost to rebuild your home. Almost half of the people in the country are at risk of earthquake damage, according to data from the National Association of Insurance Commissioners.
To help determine your risk, you can look at historical data with predictive data and expert analysis—it’s important to look at this combination because past earthquake activity doesn’t always indicate what the future will look like.
Here are the main factors to consider when determining your risk:
- Your home’s proximity to a fault line/seismic zone
- The materials your home was constructed with
- Your home’s earthquake-resistance level
It’s difficult to predict when an earthquake will occur, but if you live in one of the most at-risk states, it could be worth it to purchase earthquake insurance. The cost and deductibles might be high, but they won’t be more expensive than the out-of-pocket, cost of rebuilding your home.
How Much is Earthquake Insurance?
Earthquake insurance rates are determined by your home’s insured value. This isn’t its appraised value, but rather what it would cost to rebuild your home to the state it was in before the earthquake damage. In general, the closer you are in proximity to seismic activity, the more you will pay. Here are the factors that go into determining the cost:
- Your home’s proximity to a fault line/seismic zone
- The deductible you choose
- Your home’s age
- Your home’s location
- Your home’s construction
- Your home’s foundation
- Your deductible
- Any additional coverage you select
The percentages tend to be higher in areas of higher risk, like California. According to USAA, the average cost for earthquake insurance annually is between $100 and $300. However, more at-risk states like Alaska, California, Oregon, and Washington have premiums as high as $800 per year, on average.
Your earthquake insurance deductible is a percentage of your home’s insured value. That means that larger homes will have a higher deductible. The percentage typically ranges from 10% to 20%. That means that if you have a $400,000 home, your deductible could be as high as $80,000. So if you filed a claim for $400,000, the $80,000 would be deducted.
Unfortunately, if your damage is not extensive enough for an entire rebuild of your home, you might be responsible for the entire cost of repairs, even if you have insurance. Also, if your home is destroyed by an earthquake, your mortgage company might still expect you to pay it off.
If you decide to get earthquake insurance after a seismic event happens, you will probably have to wait at least a few months before insurance companies will sell new policies.
Is Earthquake Insurance Worth It?
Whether earthquake insurance is worth it for you will depend on your situation. It can be a trade-off because the coverage can be very valuable if you live in an earthquake-prone area, but the cost is very high. Sometimes the deductible can exceed the amount you are claiming for your loss.
If you live near an active fault, earthquake insurance could be worth it. The cost of rebuilding your home, replacing your personal belongings, and paying for temporary accommodations and dining can add up quickly. If your home is constructed of brick or masonry, it might be a good idea to get earthquake insurance because homes constructed with those materials are inflexible and more vulnerable to damage.
If you live in an area that has little or no seismic activity, it might not be worth it to pay for earthquake insurance, considering that earthquakes would be a rare event. However, if the cost is as low as $100-$300 annually, a policy could be worth it for peace of mind.
For free quotes from home insurance companies in your area, call 855-948-5219 or input your zip code in the quote tool below:
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