Earthquake Insurance – How Earthquake Insurance and Claims Work

Earthquake insurance is a type of insurance meant to cover properties and owners from financial losses caused by earthquakes. Well, unlike the regular homeowner’s insurance policies, this coverage was meant for damages caused by earthquakes and related events like aftershocks.

We all know the deal with earthquakes, they can be quite destructive to buildings, homes, and other reconstructions that can cost you quite a lot when trying to repair.

Earthquake Insurance

The standard home insurance policies exclude earthquake damage, so if you are living in an environment that is prone to earthquakes, it is best you purchase earthquake insurance.

Well, some personal benefits come with this insurance coverage, and in this article, I will be properly detailing these benefits and why you should purchase this insurance.

How Earthquake Insurance and Claims Work

The cost of earthquake insurance varies with each of the policyholders. Typically, earthquake insurance covers your dwelling up to the same limit as your homeowner’s insurance, and policyholders pay a deductible of 10% – 20% of that limit.

Let’s take for instance if your home is destroyed completely by an earthquake, your insurance company would pay up to the coverage limit, minus the deductible.

Earthquake insurance policy: Coverage limit: $150,000; deductible: 15%
Claim submitted: $150,000
Homeowner responsibility: 15% of the $150,000 claim = $22,500

If you want to file an earthquake insurance claim, you would need to call your insurance provider and report visible damage. Sometimes, it can be quite difficult to evaluate, so it might be worth getting a home inspection especially if your home is an old one.

Cost of Earthquake Insurance

The cost of insurance usually varies on certain factors which include the price of your home and the risk of the area that you are living in. In some high-risk regions, the cost of earthquake insurance might actually exceed the cost of a homeowner’s insurance policy.

California happens to be one of the most expensive states for earthquake insurance since it is located on multiple hazardous fault lines.

Factors Affecting the Cost of Earthquake Insurance

Several factors can affect the cost of home insurance outside of geography and the home value. They include:

Age of Your Home:

A lot of newer homes tend to come with better materials and can be designed with earthquakes in mind, so basically, they cost less to insure compared to much older homes.

The number of Stories:

Much taller homes have bigger chances of getting toppled, so they usually cost more to insure.

Framing materials:

Homes with wood frames cost less to insure since wood is more elastic compared to other materials.

Foundation Materials:

Raised foundations offer a home elasticity, which is quite crucial during an earthquake. This could help reduce your earthquake insurance premiums. Homes that are built on sandy soil instead of clay or rock will have lower premiums for the same reason.

Homeowners can try to retrofit their homes to get more protection and save on insurance costs. Let’s say, you can bolt your home to the foundation, brace the chimney and water heater, install automatic gas cut-off valves, and make use of plywood to strengthen crippled walls. These methods should help stabilize your home so it is less likely to sustain some serious damage in an earthquake.

Earthquake Insurance Recommendations

Determining if you would require earthquake insurance is important than ever, even if you are living far from a fault line. Sometimes you need to consider that earthquake impact can be experienced far beyond the major fault lines.

If you are considering buying a home in an earthquake-prone area, it is best that you place earthquake insurance under consideration. Below are some questions to determine if you would require earthquake insurance or not.

Are you able to afford the cost of rebuilding or repairing your home if it gets damaged?
Would you be able to replace your personal belongings if they get destroyed or damaged?
Can you pay for temporary housing and some other expenses if structural damage makes your home uninhabitable?

The rates for earthquake insurance vary significantly, from fairly inexpensive in lower-risk areas to relatively high in places that are more prone to earthquakes.