When Do You Need Earthquake Insurance?

If you have purchased homeowner’s insurance and think you are covered against natural disasters like hurricanes, earthquakes, and wildfires, think again. Standard homeowner’s and renter’s insurance policies do not cover these types of events, which means you could be out of pocket if a disaster like this strikes.

Today we will cover earthquake insurance and in future posts we will talk about insurance to protect you against hurricanes and flooding.

Earthquake coverage is probably of most concern to California residents. The California Earthquake Authority works with companies to provide insurance against quakes but the policies are expensive and often have deductibles as high as 10 to 15 percent. You first need to determine what type of damage your house is likely to sustain in an earthquake and how much the repairs might cost.

A website called ShakeOut.org is a useful resource for figuring how how susceptible your home will be in a large earthquake. Factors that can determine how much damage your structure is likely to sustain include what kind of foundation you have, how close to a fault line you live, and whether your house rests on bedrock or fill. You can also talk to local contractors to get a general sense of how much structural repairs to a house like yours are likely to cost.

The next step is to get some quotes on earthquake insurance from the California Earthquake Authority and compare the cost of a policy against how much repairing your house will be. Many California consumers have determined that getting earthquake insurance is not financially smart.

If getting earthquake insurance doesn’t make financial sense, consider applying what you would have paid in premiums to reinforcing your home. In some cases, retrofitting your house for an earthquake can pay off more than buying insurance.