Earthquake Insurance: What It Is? How Does It work? What It Covers?

Earthquakes are like bad luck. They are random and do no announce before hitting. But both are real and damage a lot before they are gone. Also, here is an interesting fact. The USA experiences almost 40,000 earthquakes every year that create havoc whenever they come. People lose homes, jobs, and loved ones in these earthquakes. And while we cannot stop earthquakes, we certainly can get ourselves earthquake insurance. It cannot stop destruction but at least help us start over once again.

However, it is sad that many people do not buy earthquake insurance. According to CEA, California, the state that often experiences this natural phenomenon, has only 10% of the population covered by earthquake insurance.

So, here we have everything you need to know to buy an earthquake policy. Let’s start!



What Is An Earthquake Policy?

Earthquake policy pays you when an earthquake hits your home. It pays you to repair your home and belongings and even for a temporary shelter while you get your home repaired.

Also read: Complete Guide On Modular Vs. Manufactured Home Insurance

But you might think that you already have homeowners’ or renter’s insurance, why buy earthquake insurance? Well, because these policies do not cover damage due to earthquakes. Your homeowners only cover fire incidents, and not even a flood incident caused may be due to the water pipe breakage in the quake.

Thus, you need to buy an extension, i.e., earthquake insurance, to your homeowners’ insurance to safeguard yourself, especially if you live in a more quake-prone area.



How do Earthquake Insurance Claims work?

Earthquake insurance works like any other insurance. You file the claim, pay the deductible, and get the claimed amount as long as it is within your insured limit.

But the critical point here is that deductible in an earthquake policy is higher. It is approximately 10-20% of the insured limit.

So, let’s take an example.

Say your insured limit is $200,000, and the deductible is 15%. Doing simple maths, the deductible amounts to $30,000. This deductible is indeed quite high.

Now, if you have minor repairs, you will not be able to claim the insurance as the deductible is too high. Thus, always try to strike a balance between your premiums and deductible. Assess how old your home is and the damage it can undergo. Also, assess how much premium you can afford.

Another point to consider is that your home, belongings, and other outside structures like garages and fences may have separate deductibles. Thus it would be best to discuss this with your insurance agent.

Also read: Vacant Home Insurance: Do you need it? What Does It Cover?

Lastly, often the damage occurs not only due to the earthquake but also the aftershocks. Thus, policies generally club all earthquakes and aftershocks within 72 hours under one claim. That is, if an aftershock hurts you within 72 hours of the first quake, you are, in a way, lucky. Because any aftershock or earthquake after 72 hours requires a separate deductible, mostly, thus, it is always a good idea to talk to your insurance agent about these terms.



What Does Earthquake Insurance Cover?

Here is a list of things that your quake policy can potentially cover:

  1. It covers repairs to your home but only for damages that were caused due to the earthquake. It may or may not cover extended structures like garages, pools, etc.
  2. Say your personal property inside the house is also damaged due to the earthquake. The policy will cover that too. Though, it does not protect your collectibles. It needs additional coverage.
  3. Building codes keep changing. So, your earthquake policy can also cover the increased cost to build according to the new regulations.
  4. It can also cover the costs to stabilize the land under your home.
  5. You can also get the costs to remove debris covered.
  6. Lastly, all the extra living expenses you incur while getting your home repaired are also covered under the policies.

All of these are separate coverages. So, do remember to ask your insurance agent about their limits and deductibles.



What Doesn’t Earthquake Policy Cover?

There are many exclusions in your policy. And it is easy to find which. You only need to head over to the coverage and declarations page, and everything is listed there. Below are a few common ones, but your exclusions will depend on the coverages you take and the company you take them from.

#1: Fire:

Say the earthquake ruptured a gas pipeline. You know what would happen next. Obviously, it started a fire. But your quake policy would not cover the damage due to that fire. But no need to worry, your homeowners’ insurance would cover it.


#2: Vehicles:

If your car kept in your garage gets damaged due to the quake, your earthquake policy will not cover the damage. But maybe your auto insurance will.


#3: Land:

In case you have landscaped your land. Again, your insurance would not pay. Also, sinkholes and other hidden openings in your land are not covered under the policy.

Even cracks and holes appearing in the middle of your yard are not covered under the policy. But if you have Engineering Costs coverage, it can pay enough to support the land that holds your home.


#4: Pre-Existing Damage:

This one is quite obvious. Damage that was there previous to the quake will not be covered in the quake policy.


#5: External Water Damage:

Tsunamis and floods are common post earthquakes. And if not for them, even if you have a lake in your surroundings that floods your house or a drain backup, etc. might cause massive damage to your home and belongings. And neither earthquake nor homeowners’ policy will cover these. You need flood insurance to support you in such cases.

Also read: How Much Homeowners insurance should i have?

All the above cases are very probable but sadly outside the earthquake policy coverage. Thus, please check the exclusions of your policy on the declarations page.



Last Words…

Earthquake insurance is a must-have if you live in a quake-prone zone. The bottom line of every insurance is that you want to save your money, especially when a disaster strikes. Then clearly, you won’t want to go broke paying premiums. Thus, carefully assess what policies and coverages you need and pay only for them. Also, shop around. You never know, you can get a good deal.

This was all. We hope you found the information helpful. And if you have any questions, doubts, suggestions, please drop them in the comments below. We are all ears and reply ASAP!