Understanding Earthquake Coverage in Homeowners Insurance

Key Facts

Standard homeowners insurance policies typically don’t cover earthquake damage.[1] Some people find this out too late when their homes are ruined by shaking, and their policies don’t cover any of the damages or losses they incur. 

Adding an earthquake-specific rider to your policy or purchasing a dedicated earthquake coverage plan is the best way to protect yourself financially. Unfortunately, few people take advantage of these products. 

California, for example, has endured six of the 10 costliest earthquakes in U.S. history. However, experts say only 10% of Golden State residents have earthquake insurance.[2] 

Plenty of earthquake policies are available. This chart can help you understand how they work with your standard homeowners insurance policy: 

	What will it cover?	What won’t it cover?
Standard homeowners	Fires, explosions, and living expenses if your home isn’t safe	Damage to your home or possessions caused by shaking or moving earth and damage from floods caused by the quake
Earthquake policy or endorsement	Damage to your home or possessions caused by shaking or moving earth	Fires, explosions, flooding, landscaping damage, and preexisting damage
Difference in conditions (DIC)	Landslides, mudflows, earthquakes, and floods	Fires, explosions, and living expenses if your home isn’t safe

How Does a Standard Homeowners Policy Handle an Earthquake? 

An earthquake is sudden and can cause intense damage to your home and possessions. Even mild shakes can ruin almost everything you own, and the damage isn’t always easy to see. 

Homeowners insurance policies rarely, if ever, cover earthquake damage. 

However, your homeowners policy may provide some assistance after an earthquake.[3] For example, the plan might cover fires that break out later or living expenses you’ll need while the fire damage is repaired. 

Homeowners often learn this lesson the hard way. For example, a couple in California didn’t have earthquake insurance, and their home was deemed uninhabitable after a quake.[4] They’re still paying the mortgage on the house, but they can’t live in it or sell it. An earthquake policy would have changed everything for this couple. 

Earthquake Coverage Options 

Homeowners have several choices to make when shopping for earthquake insurance plans. Understanding those options can help you make the right decision for your home and your family. 

The two main earthquake insurance options include the following:[5]

• An endorsement, which is an add-on to a policy
• A dedicated earthquake insurance policy 

These policies can come with one of the following payment plans:[6]

• Pure loss: The insurance company reimburses you for the value of the items you lost and the damage you endured. 
• Parameters: If the quake is strong enough to meet or exceed a specified intensity, payments are triggered according to your contract. The payouts in this type of policy are standardized for everyone.

A third option for earthquake protection is a difference in conditions (DIC) policy.[7] These policies are typically used by organizations, but they can also be purchased by homeowners who live in areas prone to certain perils, such as earthquakes. This all-in-one coverage could help cover the earthquake, associated flooding, mudflows, and more. These plans can be more expensive than other options, but they also offer more protection.[8] 

No matter what type of policy you choose, prepare for a deductible.[9] This is the amount you have to pay before the insurance company will chip in. Deductibles may be a fixed dollar amount, such as a flat $5,000, or they may be based on a percentage of the property value, which can change over time. A higher deductible typically means a smaller premium. 

Be prepared for an earthquake by keeping your deductible amount in a dedicated savings account. When you need it, you’ll be ready.

What Won’t an Earthquake Plan Cover? 

While earthquake insurance plans provide more protection than a standard homeowners policy, they often come with exclusions.[10] 

Most earthquake plans work in tandem with your existing homeowners insurance. Anything covered by your original policy is excluded from the earthquake version. Your earthquake plan may also exclude the following issues:[5]

• Fire (even if it was caused by the earthquake) 
• Landscaping damage 
• Vehicles 
• Flooding (even if the earthquake caused it) 
• Brick replacement 

A DIC plan might be different. For example, these policies often provide flood coverage alongside earthquake repairs. It’s important to read the fine print to understand what is and isn’t covered. 

Some earthquake-specific policies require homeowners to make improvements before protection takes place.[11] You might be asked to bolt your home to its foundation, brace interior walls, and place strapping guards around fixtures, such as water heaters. Other policies may give you discounts for making these changes. 

Should You Buy Earthquake Insurance?

Earthquakes happen across the United States. Researchers say about 90% of Americans live in areas with active earthquakes.[5] It’s wise for anyone to invest in this type of protection. 

Risks are higher in states such as California. Examining an earthquake map can help you understand the geographical challenges your home faces. 

Your homeowners insurance agent can help to assess your risk and develop additional insurance options. Don’t be afraid to shop for coverage. Ideally, you’ll get three quotes from different companies that you can compare and contrast. With careful examination, you can find a policy that offers robust protection at a price you can afford.

How to File an Earthquake Claim 

If you have earthquake protection, file a claim as soon as the ground stops shaking. Don’t expect your agent to contact you to start the process. You must take charge, and it pays to be prompt in your initial filing. 

Start by assessing the damage around your home.[13] Look for misaligned cabinet or entry doors, broken glass and windows, burst pipes, broken light fixtures, and foundation damage. Lisa Koosis, a former claims specialist, says, “In the aftermath of an earthquake, you should always prioritize your family’s safety. Don’t try to assess damage yourself if it means going into an unsafe area. If you need to, call in a professional.”

Do the math and ensure you’ve endured enough damage to file a claim. If the cost to fix the damages is smaller than your deductible, it might be best to handle the job yourself.

If the damage is extensive, take the following steps:[14]

1. Call your insurance agent and notify the company that you want to file a claim. 
2. Take photos and videos of all the damage. If an aftershock ruins even more things, take more photos. Be thorough in documenting all damage you can see. Any problems that occur within 72 hours are considered one claim with one deductible. 
3. Allow an insurance adjuster to inspect your home. A qualified geologist or architect may come along to spot damage that might be hidden from the naked eye. 

Ask the adjuster about making temporary repairs. For example, you might need to board up windows and doors to keep moisture out. Never make permanent changes to your home without permission, as this could invalidate your claim. 

The adjuster will determine how the damage fits with your coverage and offer a settlement. You may need to negotiate to get a sum that seems right. If you can’t agree, you can hire a lawyer to help you. 

How to Prepare for Earthquakes

Purchasing an earthquake policy is one of the best ways to protect your home and investment. A few additional steps can help to mitigate the damage an earthquake might cause. 

Preparing for an earthquake can reduce potential losses. In some cases, it can also lower your premiums.

Prepare your home by doing the following:[5]

• Bolt heavy items, such as bookshelves and televisions, to the walls. 
• Brace the water heater to the wall with straps. 
• Install automatic gas shutoff valves. 

When an earthquake starts, it’s too late to protect your home and possessions. Get to safety as quickly as possible. You’ll have plenty of time to assess the damage later, and no possession is worth putting yourself in harm’s way.

Protect Your Home From Earthquake Damage

Earthquakes happen throughout the United States, and they can cause intense damage. Read your homeowners insurance policy carefully to find out whether you’re protected. An additional policy or rider can give you peace of mind. Ask your insurance agent about the best options for you and your home.