If your house is in an earthquake-prone area and you’re able to foot the bill on top of homeowners insurance costs, then earthquake insurance might be worth it. But in some cases, it may not be worth the added cost.
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While most stateside earthquakes produce mild ground shaking and have little impact on communities, all it takes is a single big one to wipe out entire homes and businesses.  Yet only a relatively small fraction of homeowners have earthquake insurance that can pay out for these expensive disasters — even in the most high-risk areas of California. 
A basic homeowners insurance policy does not cover damage caused by earthquakes. It will generally cover fire damage following one, but not the earthquake damage itself. That means the only way to protect your home from earthquake damage is to purchase additional coverage. But when you consider the low risk of a major quake, is earthquake insurance worth the potentially high policy cost?
That really depends on your home’s earthquake risk and whether it makes sense for you financially. In this guide, we’ll help you weigh the pros and cons of earthquake insurance.
To protect your home and belongings against earthquake damage, you’ll need to purchase earthquake insurance. Your insurer may also offer optional earthquake coverage that you can add to your homeowners insurance
Earthquake insurance is said to be expensive in areas most prone to ground shaking, costing as much as thousands of dollars annually for a policy
The high policy cost, along with the normally high deductibles (the amount you owe on claims), lead many to go without earthquake insurance
If you live in an earthquake-prone area and you’re on the fence about earthquake insurance, you’ll need to weigh whether the risk of losing your home and not having coverage is worth the cost of the policy itself
Earthquake insurance covers the cost of rebuilding your home or replacing your belongings after an earthquake disaster. If your home is severely damaged by a quake, this coverage can also pay you for temporary living expenses (hotel stays, restaurant meals, etc) while your house is being repaired.
Bear in mind earthquake insurance will not cover disasters caused by earthquakes, including damage caused by fires or flooding. You’d have to file a home insurance claim to cover fire losses after an earthquake, and you’d need flood insurance to pay out for any flood damage.
A standard earthquake policy consists of the following coverage:
Dwelling coverage: Covers the cost of repairing or rebuilding your house and any attached structures (like a garage or patio)
Personal property coverage: Covers the cost of repairing or replacing damaged belongings, including furniture, clothing, appliances, and electronics
Additional living expenses: If an earthquake causes extensive damage to your home, you can tap into this coverage to pay for temporary living expenses while your house is undergoing repairs. If you rent your home out to others and it’s damaged, you may also be reimbursed for lost rental income
Insurers will also offer optional coverages that you can add to your earthquake policy for an additional cost. The most commonly offered add-ons are building code upgrades coverage, which pays the added cost of rebuilding your house up to current building codes, and emergency repairs coverage which covers the cost of immediate repairs intended to prevent further damage after a quake.
Earthquake insurance is available through both major insurance providers and specialized earthquake insurers in all 50 states. This coverage can be purchased as an optional home insurance endorsement or as a separate policy. If you live in California, you can purchase earthquake insurance through the California Earthquake Authority — a privately funded, publicly managed entity that can provide coverage to state residents.
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Earthquake insurance isn’t required by law, and most mortgage lenders won’t require it either, but if you live in an area that’s prone to seismic activity, earthquake coverage may be a good idea.
Homes in certain parts of California, Alaska, Oregon, Washington, Nevada, and Hawaii are at particularly high risk of earthquake damage, and tremors are also becoming common in parts of Texas and Oklahoma where fracking (hydraulic fracturing) is common.
Be sure to ask your homeowners insurance agent about whether or not it’s necessary for you to purchase earthquake coverage. The United States Geological Survey (USGS) also includes a list of factors that you should consider when evaluating your earthquake insurance needs, including: 
Your home’s proximity to an active fault
Frequency of earthquakes in your region
How long it’s been since the last earthquake
Your home’s construction type (if it’s a stone or brick home, it has a higher probability of being damaged by an earthquake)
The soil condition and slope of the land
Whether or not your home is built specifically to withstand earthquakes
The cost of earthquake insurance and policy factors (like the deductible amount)
If you have a mortgage, the amount of equity you have in the home may also influence your decision. If your mortgage is mostly paid off and the bank no longer owns much of your home, for example, you may be more inclined to purchase earthquake insurance. The more equity you have in the home, the greater incentive you have to make sure it’s covered for a rebuild after a quake. On the other hand, if the bank owns most of the home and you’re comfortable walking away from your damaged home after an earthquake, then it might not make sense to purchase earthquake insurance.
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Your earthquake insurance rates are largely determined by the amount that it would cost to rebuild your home at the current prices of construction and labor. Your dwelling coverage limit should be equal to this amount, not the home’s sale price or appraised value.
In California, every $100,000 of coverage will cost you $500 to $1,000 in annual premium, so a larger home is naturally going to have much higher rates than a small or mid-sized home. Other factors that go into determining your rates are:
Your home’s age and location
Your home’s foundation (slab or raised)
Your deductible (the higher your deductible, the lower your rates)
The construction type of your home (frame or masonry)
When we ran a sample quote for earthquake insurance through the California Department of Insurance, we found that masonry homes cost a staggering $2,000 more to insure annually than frame homes.
To keep your rates down, check with your insurance provider to see what kind of discounts or credits are available. The California Earthquake Authority, for example, offers discounts of up to 20% for frame-constructed homes that were built before 1960 if they’re retrofitted with earthquake-proof structural features like foundation bolting and cripple wall bracing. If you own a newer home, your rates will already be lower since it’s built up to code.
When you file a claim for earthquake damage to your home, you’ll have to pay your policy deductible before your insurance will kick in to cover the remainder of the loss. Earthquake policies generally use “percentage” deductibles, which means you’ll pay that percentage of your home’s insurance amount rather than a fixed dollar amount that you pay on home insurance claims. Most insurers give you the option of earthquake deductibles between 5% and 25%. If you choose a higher policy deductible, you’ll have lower earthquake insurance premiums, but you’ll have to pay out more on a claim.
If you file a claim for damage to your home’s structure and belongings, most insurers will make you pay separate deductibles for the dwelling and personal property portions of your policy. Personal property coverage deductibles typically aren’t as high as dwelling deductibles. You aren’t charged deductibles on additional living expense claims.
The table below illustrates how earthquake deductibles work on a specific policy.
|Dwelling coverage||Personal property coverage||Total|
|Amount you’re responsible for||$30,000||$2,000||$32,000|
|Amount insurer is responsible for||$70,000||$78,000||$148,000|
In the above example, the residence is insured for $200,000 with a 15% deductible, and personal belongings are insured for $100,000 with a 2% deductible. If the home and belongings incurred $100,000 and $80,000 in earthquake damage, respectively, the policyholder would be responsible for paying $32,000 in deductibles before they’d be reimbursed the remaining $148,000 of the loss.
Suffice it to say, earthquake deductibles are pricey. If you can’t afford to pay it and you live in a FEMA-designated “disaster area”, you may be able to get financial assistance from FEMA or the California Department of Insurance.  You may also be able to take out a low-interest loan with the Small Business Administration (SBA), which offers disaster loans to homeowners as well as small business owners. 
Not all earthquakes cause catastrophic damage. In fact, most are small and last only a few seconds. But all it takes is one to cause extensive structural damage to your home and surrounding areas.
If you’re on the fence about earthquake insurance, ask yourself how much it would cost to rebuild your home without insurance. You should also keep in mind that, even if your home is destroyed by an earthquake, you’d also still be on the hook for any remaining mortgage payments you have left — unless you’re willing to take a hit to your credit.
At the end of the day, earthquake insurance is going to be pricey — especially for those in the most high-risk areas, but the cost of being underinsured during a disaster could prove to be far greater.
The Golden State accounts for around two-thirds of the country’s earthquake risk, and 61% of the country’s average annual earthquake losses occur in California. Suffice it to say, if there’s anywhere homeowners should carry earthquake insurance, it’s in California. If you live within 30 miles of an active fault (you can check for that here), you should consider insuring your home against earthquake damage. Earthquake insurance can be purchased through the California Earthquake Authority. If you’re looking to keep costs down, the CEA says it has flexible insurance offerings that can be tailored to meet your budget.
Homeowners insurance doesn’t cover “earth movement”, including damage directly caused by earthquakes, so if you don’t have earthquake coverage, then you’ll have to cover any earthquake damage out of pocket. If the quake is declared a “major disaster” by the federal government, affected residents may be eligible for a limited amount of public assistance funds.
The average cost of home repairs after an earthquake is anywhere from $4,000 to $30,000, according to Home Advisor.
There are eight different types of homeowners insurance policies for various home types and coverage needs.
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