Earthquake Insurance: Things to Know


Residing in California comes with many perks: the weather is beautiful, there is never a shortage of things to do, and you’ll find plenty of diversity amongst the population. It is inevitable that living here is also like signing a contract that you agree earthquakes could happen at any given time. Whether you have experienced them all firsthand, or have slept through every single one, your home could be impacted each time. Although, it is an optional coverage, many people choose to purchase an earthquake policy for this very reason.


How Does It Work?

Unlike most other personal insurance policies, earthquake insurance uses a deductible that is a percentage rather than a dollar amount. Generally, the percentage that you must pay out of pocket will be either 10%, 15%, or 20% of your dwelling value during an earthquake related loss. The policy can either be added onto your current homeowner’s policy, or purchased as a standalone policy depending upon the carrier.


How Are Rates Determined?

There are many factors that go into determining earthquake insurance rates. They include: zip code, distance to nearest fault line, age of the home, cost to rebuild the home, number of stories, and building materials. Of course, your premium also relates to your chosen coverage limits and deductible amount.


What Is Covered?

If you must file a claim on your earthquake policy, it is important to know what will be covered. In most cases, you will need coverage for repairs made to your home or other structures (such as your garage). You can also get coverage for any personal items that have been damaged, like furniture and clothing. If you are unable to stay in your home during these repairs, you may even be able to obtain additional living expenses to rent a hotel room until it is safe to return home.


What Is Excluded?

Damage such as the following will not be covered under your earthquake policy:

Vehicles – Your comprehensive auto insurance policy will handle this

Fires because of the earthquake – This will fall under your homeowner’s policy

Flooding – You must obtain a flood policy

Sinkholes – This is generally offered as a separate endorsement on your homeowner’s policy


Why Do People Go Without It?

As published by the LA Times in 2017, only about 17% of Californian homeowners have purchased earthquake insurance. Cost is likely one of the top reasons why people elect not to obtain coverage. Another reason is that some people may believe their homeowner’s insurance will kick in; earthquake is almost always an excluded cause of loss in the policy.

Kristen Nadel is a broker/agent at Fairfax Insurance Services.

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