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Earthquake Insurance - What You Need to Know

Possibly the most important thing to know about earthquake insurance is this: A basic home insurance policy does not cover earthquake damage. This is also true of condo and rental insurance. Earthquake insurance must be purchased as an endorsement or a separate policy.

Earthquakes have occurred in 39 states since 1900, and about 90% of Americans live in areas considered seismically active. Yet only a small percentage of people purchase earthquake insurance. Additionally, each year, more homeowners drop earthquake coverage because they think the policies cost too much and cover too little. It’s a serious gamble: Earthquakes can cause severe, expensive damage.

According to the U.S. Geological Survey, there is a 75 percent probability that one or more damaging earthquakes of magnitude 6.5 or larger will strike the Puget Sound area during the next 10 years. To put this in perspective, an equivalent earthquake in Eureka, CA in January of 2010 damaged 463 buildings and caused approximately $43 million in losses.

What does earthquake insurance cover?

Ideally, your earthquake insurance policy covers the cost to replace or repair your damaged property. Here are a few options to consider when picking a plan:

• Does the earthquake insurance policy cover only the dwelling? Are accessory structures, such as garages, also included?
• Will your policy pay for the contents of your home and for additional living expenses if your home is badly damaged or destroyed?
• Are there any exclusions or limitations to the earthquake insurance coverage?
• What deductible must you pay before the earthquake insurance kicks in?

How much does earthquake insurance cost?

Earthquake insurance rates are determined on several rating factors, such as:

• Older homes cost more to insure than new homes.
• Wood homes get better rates than brick because wood bends with stress.
• Higher risk areas cost more, and most policies carry a high deductible – anywhere from 5 to 25 percent of your replacement coverage limit.

How much coverage should I buy?

When you decide to purchase earthquake insurance, remember you should buy enough to cover the costs of rebuilding your house and replacing broken possessions. The amount of earthquake insurance you buy should be based on replacement and reconstruction costs, not the market value of your property and possessions.

You should also find out your rights for filing claims before you sign any earthquake insurance policy. It’s important to know how much time you have to file a claim following a quake. In some cases, damage from earthquakes is not immediately apparent.