Statistics from the Earthquake Hazards Program of the U.S. Geological Survey (USGS) show that more than 40 significant earthquakes occurred in the United States in 2019—with most in California. A significant earthquake is one that’s capable of producing damage based on its magnitude, the ability to feel the earthquake, and pager-level alert. During an earthquake, there is an initial bolt, followed by the ground shaking for a while. There can also be aftershocks after the initial earthquake passes. These can occur intermittently for weeks and even months. As a result, Federal Emergency Management Agency (FEMA) found that these earthquakes have caused about $6.1 billion in total annual losses in the U.S.
Knowing the havoc that earthquakes can wreak on homes and personal property, some people—primarily those living in California—take the cautionary step of obtaining earthquake insurance. But in reality, very few of the Golden State’s residents have this type of coverage. According to the California Department of Insurance, just about 15% of homeowners in the state had earthquake coverage in 2018.
The National Association of Insurance Commissioners (NAIC) also found that nearly half of all Americans across 48 states are in danger of damage from an earthquake. Even though so many are at risk, only 25% to 28% of those U.S. homeowners have earthquake insurance.
If you live in an earthquake-prone area, it’s important to understand the steps that you may need to take to cover the damage and the losses that may result from this type of natural disaster. Here’s how to use earthquake insurance if you feel you need protection for your home and possessions.
Do You Need Earthquake Insurance?
Homeowners and renters insurance do not cover earthquake damage. Your policy may cover a fire that results from an earthquake, but check with your insurance company. If you live in an area prone to earthquakes, you can purchase an earthquake insurance policy from a company nearby. In fact, if you live in California and have homeowners insurance, your insurance company must offer to sell you earthquake insurance.
Recovery after an earthquake may take months or even years. When an earthquake happens, it is essential to report the claim immediately to your insurance company or agent, with complete details of the loss. The sooner you make the claim, the sooner the insurance company can send out a claims adjuster to inspect the damage and determine how much the company can pay out on your claim. This will ensure your claim will be handled promptly and efficiently—and allow you to return to your normal life and activities as soon as possible.
When deciding whether to purchase earthquake insurance, you should take a close look at the cost of the insurance premium and the deductible, which is the amount you’ll have to pay out of pocket before the insurance company reimburses you for any damage. In California, for example, premiums vary by the size of your home but can be high. The California Earthquake Authority (CEA) is a privately funded not-for-profit company created by the state of California that sells this type of insurance in the state. It offers a premium calculator to help Californians estimate what earthquake premium they can expect.
Homeowners there have the option of choosing a deductible ranging from 5% to 25%. The deductible is a percentage of the home’s value. For example, a home worth $500,000 with a 15% deductible would mean the homeowner is responsible for the first $75,000 of expenses.
What Does Earthquake Insurance Cover?
Earthquake insurance covers damage to your home as well as your personal belongings that were damaged or destroyed during the event. You may also be able to add coverage to a homeowners insurance policy by an endorsement, also known as a policy rider.
When deciding on the amount of earthquake coverage you may need, take into account how much it will cost to replace your home if you have to rebuild, as well as the cost of its contents. This is called replacement cost coverage. You’ll want this instead of an actual cash value (ACV) policy.
Damage to buildings during an earthquake will vary based on the magnitude of the earthquake and the construction type of the building. Any type of building can suffer earthquake damage, but newer buildings built to withstand earthquakes will sustain the least amount of measurable damage. Brick and wood frame structures fare poorly in quakes and may suffer broken windows, wall separation, and partial or total collapse. Heavy items may fall off shelves, which can cause physical injuries and property damage.
How Much Does Earthquake Insurance Cost?
According to American Family Insurance, earthquake insurance costs an average of about $800 per year, or about $67 per month. However, that premium may increase for homeowners living in high-risk areas. For those living in areas less at risk of having an earthquake, an insurance policy may be as affordable as $100 to $300 per year. If you live in an area that could be affected by an earthquake, this cost could be worth it in the long run.
Filing an Earthquake Insurance Claim
If you ever need to file an insurance claim because of damage to your home and personal items after an earthquake, here are the steps to follow:
- Take pictures of the damage to your property and home to document what happened.
- If you have previously made a home inventory, either through video, photos, or a physical list, use it to assess which of your possessions have been damaged or destroyed.
- Locate your critical documents, including your insurance policies and any personal information that you may need.
- Keep a record of all your receipts for any earthquake-related expenses, such as food and lodging, if you are displaced from your home.
- File your claim via phone or through your insurance company’s website.
- Schedule an appointment for the claim adjuster to inspect the damage.
- If you disagree with the insurance adjuster's initial assessment of the damage, consider getting a second opinion from a licensed structural contractor/engineer or a public adjuster. You can check with your state’s department of insurance for a list of licensed public insurance adjusters.
By following these steps, you may be on your way back to your normal way of life after this natural disaster. And before the damage is even done, check out FEMA’s tips, the Department of Homeland Security’s advice, and DisasterAssistance.gov for even more help in being prepared and gaining assistance.