Many assume that earthquake damage is covered under their standard homeowners or renters insurance policy, but that’s typically not the case. Homeowners and renters in California need to purchase a separate earthquake insurance policy to ensure their home and belongings are covered.
Did you know that more than 10,000 earthquakes occur in Southern California each year? Despite that, just 13 percent of homeowners in California have earthquake insurance, according to the California Department of Insurance. An earthquake can occur unexpectedly at any instance, and you should guarantee you and your belongings are protected.
Earthquakes that exceed a six magnitude, considered a major earthquake, can cause significant damage to your home and property as well as injuries.
California earthquake coverage
If you have homeowners insurance in California, it’s mandated by the state that your home insurance company also offer to sell you earthquake insurance. Many insurance companies in the state opt to sell earthquake insurance provided by the California Earthquake Authority (CEA). The closer you are to a high-risk area, the higher your premiums will be, to protect your assets from perils.
Earthquake insurance policies are available for homeowners, renters, condo owners, and even mobile homeowners. You have the option of choosing the amount of coverage you need and your own deductible, which is the price you’re required to pay upfront before any additional costs are covered by your insurance company.
What earthquake insurance covers
There are three basic parts to an earthquake insurance policy, as outlined below.
- Dwelling coverage: Covers the structure of your home up to a certain limit. CEA offers deductible options for dwelling coverage ranging from 5 percent to 25 percent of your coverage limit. For example, if you had a 10% deductible on a $300,000 coverage limit, your deductible would be $30,000. That means that in the event an earthquake caused $75,000 worth of damage, you would be responsible for paying the first $30,000 and your insurer would cover the remaining $45,000.
- Personal property coverage: This covers things inside your home, such as TVs, bikes, computers, and other valuables with a limit ranging from $5,000 to $200,000. This also has deductible options ranging from 5 percent to 25 percent. If you had $75,000 worth of personal property coverage with a 10% deductible, your deductible amount would be $7,500. If you had $30,000 worth of damages to your personal belongings, you would be paying $7,500 and your insurance carrier would cover the remaining $22,500.
- Additional living expenses (ALE): This coverage, also known as loss of use, covers your temporary living costs if your home is uninhabitable after the earthquake. The limit range is between $1,500 to $100,000. There is no deductible for this coverage through the CEA.
What earthquake insurance doesn’t cover
All insurance policies have different exclusions — make sure you read and go over your policy in depth. There are multiple instances where earthquake insurance doesn’t cover you, though you may be covered by a different insurance policy.
- Fire: Fire damage to your home, even if caused by an earthquake, is covered under your standard homeowners insurance policy, not your earthquake insurance.
- Land: If a fence falls down or your pool is affected by the quake, you aren’t covered under your earthquake insurance because it only protects your home, not your property.
- Vehicles: Earthquake insurance doesn’t cover your car. Typically, damage to your vehicle from an earthquake is covered if you have comprehensive coverage on your car insurance, but be sure to check with your car insurance company.
- Flood: Earthquake insurance doesn't cover flood damage. You’d need a flood insurance policy for protection.
It’s important to always read your policy carefully and thoroughly to know what is and isn’t covered.
How much does earthquake insurance cost?
Earthquake insurance costs an average of $800 a year in California, though it varies based on many factors.
The cost of an earthquake policy depends on the area you reside in, how old your home is, and the number of stories it is. Homes with wooden frames and homes with slab foundations cost less to insure because it gives the home some elasticity during an earthquake.
The CEA has a free earthquake premium calculator you can use to determine how much earthquake insurance would cost for your unique needs.
If you live in California, you should consider obtaining an earthquake insurance policy, keeping in mind most Californians live within 30 miles of an active fault. It’s especially important to consider earthquake insurance if you live in a high-risk area where earthquakes are more frequent and more powerful.
Alternatives to standard earthquake insurance
Looking for an alternative to standard earthquake insurance? A new option for protection for disasters, such as earthquakes, is what’s called parametric insurance. Parametric insurance policies make payouts based on the occurrence of data measurement, as opposed to a claims adjustment process. This results in much quicker payouts and can help you get money for quick fixes right after earthquake damage occurs.
Parametric insurance has much lower limits but it also has a lower deductible. If you pair parametric insurance with earthquake insurance, it can help cover the cost of your deductible on your standard policy.
One option for this type of insurance is Jumpstart. You learn more about Jumpstart by visiting its profile page.
How to purchase earthquake insurance
Because California law requires all homeowners insurance companies in the state to offer earthquake insurance, you should contact your current home insurance company for more information on getting earthquake insurance.
If you’re unhappy with your home insurance or unsure which companies are best, see which companies other homeowners recommend in California. You can select earthquake insurance under the additional coverages to find eligible companies.
Keep in mind purchasing earthquake coverage after a quake doesn’t protect you from the damages a previous earthquake already caused — only future quakes. Also, after an earthquake, insurance companies often don’t sell earthquake policies for a certain period and once they start re-selling policies they are most likely going to be higher.
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