In areas prone to seismic activity, here’s how earthquake insurance operates differently than standard home or renters insurance policies:
- Availability & Cost
- Higher Premiums: Predictably, premiums for earthquake insurance in earthquake zones are significantly higher than in low-risk areas, reflecting the greater chance of a damaging event.
- Specialized Providers: Due to the risk, some general insurers might not offer earthquake coverage. Specialized companies or government-backed programs often fill this need:
- California Earthquake Authority (CEA): A publicly managed provider offering earthquake insurance to California residents.
- Mandatory in Some Cases: If you live in a very high-risk zone and have a mortgage, your lender might require you to carry earthquake insurance.
- High Deductibles
- Percentage-Based: Unlike standard insurance with fixed-dollar deductibles, earthquake policies typically have deductibles calculated as a percentage of your dwelling’s insured value (e.g., 10%, 15%).
- Manage Risk & Cost: These high deductibles help insurers manage their risk and keep premiums somewhat affordable, though they mean you’ll pay more out-of-pocket before coverage kicks in.
- Coverage May Be Limited
- Focus on Structure: Policies primarily cover the main dwelling. Detached structures, landscaping, and swimming pools might have limited coverage or require additional endorsements.
- Exclusions: Damage caused by related events like fire following the quake, tsunamis, or landslides might not be included.
- How to Purchase
- Separate Policy or Endorsement: You’ll need either a separate earthquake policy or add it specifically to your existing homeowners or renters insurance.
- Assessment Required: Insurance companies may require a separate inspection to assess your property’s earthquake resilience before issuing a policy.
Why It’s Important Despite the Cost
- Catastrophic Damage Potential: Earthquakes can cause widespread devastation, and repairs could easily bankrupt you without insurance.
- Peace of Mind: The financial safety net earthquake insurance provides is invaluable for homeowners in earthquake-prone areas.
Important Considerations:
- Thoroughly Review Policies: Carefully compare policy terms, coverage limits, and exclusions to make informed decisions.
- Retrofit for Discounts: Seismic retrofitting to make your home more earthquake-resistant might qualify you for discounts on earthquake insurance.