Is earthquake insurance worth it?

Standard homeowners insurance policies exclude damage caused by earthquakes, so if you live in an area prone to temblors, you may wonder if it's worth buying earthquake insurance. The answer depends on how much risk you're willing to take and whether you can afford to repair your home without insurance. Learn more about how earthquake insurance works, and how much coverage you may need.

Key takeaways:                                                                

• Earthquake coverage can be worth the cost if your home is in a location with high seismic risk and you have an older, more vulnerable structure.
• Standard homeowners insurance policies exclude earthquake damage, so you’ll have to buy a separate policy or an endorsement to get coverage.
• Earthquake insurance deductibles are typically based on a percentage of your home's total insured value, which means you may pay high out-of-pocket costs before coverage kicks in.

When is earthquake insurance worth it?

Ask yourself if you’d be able to afford to repair or replace your home after an earthquake without insurance. If you’d need to get a loan, use emergency savings, or access critical resources to fix your home, earthquake insurance can protect you.

Paying for earthquake protection may be unnecessary if you live in a safer place with lower risk of an earthquake, have the financial resources to cover your losses out-of-pocket, own an older home whose fair market value is low relative to the cost of insurance, or your deductible is so high that the policy won’t pay in any case short of a catastrophic loss.

What is earthquake insurance?

Earthquake insurance pays to repair or replace your property if it’s damaged in an earthquake.

Traditional policies reimburse covered losses that exceed your deductible up to your coverage limit. Some carriers also offer parametric earthquake insurance, which quickly pays a preset amount based on the quake’s measured severity.

Standard renters insurance and homeowners insurance policies with hazard insurance specifically exclude earthquake damage, so you can't rely on that policy to protect you if you live in an at-risk area. You can use the USGS Seismic Hazard Map to gauge the risk where you live.

What does earthquake insurance cover?

Earthquake insurance policies commonly cover the following:

• Your dwelling. Dwelling coverage pays to repair or rebuild your home after an earthquake. It may include structures attached to your home, such as a garage. It also may pay for repairs to unattached damaged structures on your property, such as a barn, shed, or accessory dwelling unit (ADU).
• Personal property. Earthquake insurance may cover damage to your personal belongings, such as furniture and appliances.
• Loss of use. If you’re unable to live in your home while it’s being repaired or rebuilt, your policy may pay living expenses, such as a rental or hotel, plus meals.
• Building code upgrades. If you’re repairing or rebuilding an older home, you may need to upgrade it to meet building codes that have taken effect since it was originally built. This coverage helps cover the cost of these upgrades.
• Emergency repairs. Emergency repairs are fixes that must be made quickly to protect your home or personal property from further damage. For example, repairing broken windows to keep out rain and snow that cause additional damage to your home and its contents.
• Loss assessment. If your home is part of a homeowners association (HOA), loss assessment covers your share of any special assessment the HOA levies to repair earthquake damage to common areas.

What does earthquake insurance not cover?

Common earthquake insurance coverage exclusions include:

• Fire. If a quake ruptures a gas line and starts a fire, that damage is usually covered by your standard homeowners insurance policy, not your earthquake policy.
• Flooding. If an earthquake causes a flood or tsunami, related water damage is not covered. You’ll need a separate flood insurance policy.
• Land movement. Damage from non-seismic land movements, such as sinkholes and landslides, is not covered.
• Vehicles. Earthquake damage to cars, boats, and aircraft is typically excluded. Check your auto policy’s comprehensive coverage.

How much is earthquake insurance?

The average cost of earthquake insurance premiums ranges from $800 – $2,000 but can go much higher depending on your property and its location.

How do earthquake insurance deductibles work?

Insurers usually have high earthquake deductibles compared with homeowners insurance.

Most policies set the deductible as a percentage of how much coverage you buy. A deductible of 10% – 20% deductible is common, though a higher premium could get you a deductible in the 2% – 5% range.

Say your home is insured for $500,000, a 10% – 20% earthquake insurance deductible equals $50,000 – $100,000, you must pay before insurance contributes to covered repairs.

Some policies have separate deductibles for separate coverage areas. For example, detached structures may have a separate deductible from your primary dwelling coverage.

Choosing a higher deductible generally reduces your premiums but increases your out‑of‑pocket risk.

Factors that affect earthquake insurance costs

Several different things affect what you’ll pay for earthquake coverage, including:

• Location. If your home is in a high-risk area, you should expect to pay more for earthquake insurance. Homes built on sandy soil rather than clay or rock will likely require higher-cost insurance.
• Age of your home. If you have an old house, you'll likely pay more for coverage. Insuring homes that are not up to current building codes, or those built of brick or masonry, will cost more.
• Number of stories in the home. A home with multiple stories likely will cost more to insure than a single-level home.
• Rebuilding cost. The estimated rebuilding costs have a big effect on your insurance costs. The more your home is worth and the more it will cost to rebuild it, the more you’ll pay for insurance.

California snapshot: CA earthquake insurance

Many people who buy a house in California obtain insurance coverage through the California Earthquake Authority (CEA). The policies are sold by participating insurers, while the CEA is a publicly managed, privately funded, not-for-profit organization.

CEA policy options exist for:

• Homeowners
  
  
• Earthquake insurance for renters
  
  
• Earthquake insurance for condo owners, including loss assessment options
  
  
• Earthquake insurance for mobile homes or manufactured homes

Average premiums for earthquake insurance in California vary by location and home. Premiums for a single-family home range on average from $800 – $2,000 and up. Your price depends on the specifics of your home, the policy and coverage you choose, and the deductibles.

The CEA offers discounts of up to 25% to qualified homeowners and to those who have completed a seismic retrofit on older homes to make them more resistant to shaking.

Use the CEA Premium Calculator to estimate costs and compare options.

Is earthquake insurance worth it in Los Angeles?

U.S. Geological Survey long‑term models estimate notable probabilities of strong earthquakes affecting the Los Angeles area over the next few decades.

If rebuilding would be unaffordable without help, earthquake coverage is worth considering.

What happens if you don’t have earthquake insurance?

If your home is damaged or destroyed and you have no earthquake insurance, you’re on the hook for 100% of repairs, temporary housing, and the costs to replace your belongings.

What government assistance may cover

If you’re recovering after a natural disaster like an earthquake, the government may provide financial assistance for initial short-term lodging as well as any funding for expenses related to the immediate safety or health of your family.

The Federal Emergency Management Agency’s (FEMA) maximum individual assistance payout is $43,600 for housing assistance and another $43,600 or other needs assistance.

How much earthquake insurance coverage do you need?

If you decide to buy earthquake insurance, buy enough to cover your rebuilding costs and personal belongings, and consider whether you need loss-of-use coverage.

If you want to cover the full cost of rebuilding your home, determine the average cost per square foot to build in your area and use that as a guide for how much coverage you need.

FAQ

Here are answers to some common questions about earthquake insurance.

Does homeowners insurance cover earthquakes?

No. Standard homeowners insurance policies don’t cover damage caused by earthquakes. You need to buy a separate policy to cover earthquake damage.

How much is the deductible on earthquake insurance?

Deductibles on earthquake insurance policies usually range from 2% to 20% of your coverage limit. Lower deductibles will require higher premiums.

What percentage of people have earthquake insurance?

Only 11% of American homeowners have earthquake insurance, according to the Insurance Information Institute.

Will earthquake insurance pay out?

Your payout on an earthquake insurance claim will depend on your policy terms, covered damage, and whether your losses exceed your deductible.

What happens if your house is destroyed in an earthquake?

If your home is destroyed by an earthquake, your standard homeowners insurance policy will not cover the damage. That means you'll be fully responsible for rebuilding expenses and your remaining mortgage balance, unless you have a separate earthquake insurance policy or endorsement. Under an earthquake policy, you must pay your deductible first. After your deductible is met, your policy will pay to reconstruct your home, replace your damaged personal belongings, and cover temporary loss-of-use living expenses, up to your coverage amount.

Do any states require earthquake insurance?

No states require earthquake insurance, even in high-risk zones. Some states, including California, require that carriers offer earthquake coverage to policyholders as an option.

Can renters get earthquake insurance coverage?

Yes. Separate from renters' insurance, earthquake insurance can apply to renters’ personal property and loss-of-use needs, depending on the policy.

Does earthquake insurance cover damage to my car?

Earthquake policies commonly exclude motor vehicles. Review your existing auto insurance coverage for details.

The bottom line: Is earthquake insurance worth it?

Earthquake insurance is worth considering when your seismic risk, rebuild costs, and home vulnerability – combined with your deductibles – would make a major quake financially difficult to absorb on your own. Compare quotes, review coverage details and deductibles carefully, and talk with an insurance agent to decide what fits your risk and budget. Coverage, exclusions, and pricing vary by insurer, policy, state, home characteristics, and limits, so always review your policy documents before buying.

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