Despite the risk that earthquakes might pose to you, your home, and your belongings, the standard homeowners policy doesn’t cover damage caused by earthquakes. So, if you’re hoping to protect yourself and your property from some of the costs of an earthquake, you’ll need to purchase an earthquake insurance policy or add it to your homeowner’s policy as an endorsement. This article discusses the basics of earthquake insurance as well as the insurance company’s obligations to you.

What Does Earthquake Insurance Cover?

A typical earthquake insurance policy will cover three basic categories:

• Home: Like a homeowners policy, earthquake insurance will cover damage to the structure of your home, such as cracks in the ceiling, walls, and foundation.
• Personal Property: An earthquake policy will also cover certain contents of your home, like electronics and furniture. However, the coverage is typically much lower than other types of insurance as most policies will only cover a relatively low set dollar amount, and usually excludes things like china and chandeliers.
• Alternate Living Expenses: Standard earthquake insurance will also cover temporary housing expenses if you can’t live in your home while repairs are being made. However, this coverage is also much less than other kinds of insurance, with set dollar limits such as $2,000 which can run out quickly.

However, not all damage caused by an earthquake will be covered by your insurance policy. Typical exclusions from coverage include the following:

• Separate Structures: Most policies won’t cover structures not attached to your house, like a garage, fence, or pool.
• Water Damage: If an earthquake causes flooding or damage to something like a sewer line, you would need to look to your flood insurance policy rather than earthquake insurance.
• Car: Your car is also excluded from coverage. If damaged in an earthquake, you may be able to recoup those losses if you have comprehensive auto insurance.

Who Needs Earthquake Insurance?

Individuals who could benefit from earthquake insurance include those who live on or close to fault lines, but also people who live further out or in areas with lesser-known seismic activity (such as the New Madrid fault in Missouri). However, despite the extreme damage that earthquakes cause, the percentage of people who actually have earthquake insurance is considerably lower than other types of insurance.

For one thing, insurance companies don’t market these policies as much because it’s difficult to spread the risk among policyholders who aren’t likely to need it and those who are (for example, people in New Hampshire don’t tend to think they’ll need earthquake insurance). Additionally, even those who might need it are deterred because many available policies have relatively high deductibles and premiums.

How Much Does an Earthquake Insurance Policy Cost?

The cost of an earthquake insurance policy varies considerably because the risk of experiencing earthquake damage varies so significantly. When determining premium rates, an insurance company will look at many risk factors, including:

• Location: Where you live is a substantial factor in assessing your earthquake risk. Those living along fault lines in California will pay a lot more for earthquake insurance than people living in North Dakota, for example. Location also includes whether you live in a densely- or sparsely-populated area.
• Your Home: The insurance company will also look at the age and condition of your home. An old, three-story home made out of brick carries more risk than a newer, single-story one made out of wood.
• Retrofitting: If your home has been retrofitted to make it more earthquake-safe, this could bring your insurance costs down.

The deductible for earthquake insurance is also higher and calculated differently than in other insurance policies. Here, the deductible is usually a percentage of the policy limit amount. In high-risk areas like California, deductibles are as high as 10-20 percent. So, a policy with a $300,000 limit would have a deductible between $45,000 and $60,000.

Obligations of the Insurance Company

While earthquake insurance is optional and many insurance companies don’t actively market their earthquake insurance plans, companies in California must at least offer earthquake insurance if they also offer homeowner’s insurance. More generally, insurance companies must abide by their state’s insurance laws, including contract laws and the obligation to act in good faith when dealing with customers and insurance claims. If your insurance company isn’t living up to its responsibilities under your policy, you may be able to file a breach of contract lawsuit, a bad faith lawsuit, or contact your state’s insurance commissioner.

Get Help Dealing with Your Earthquake Insurance Claim

Of course, you hope you’ll never need to use your earthquake insurance. But if you are facing the devastating consequences of a trembler, the last thing you need is to be fighting your insurance company at the same time. If you’re trying to figure out coverage issues or dealing with an insurance company who won’t pay for your legitimate claim, contact a local insurance attorney familiar with the insurance laws in your state.