Solved! Does Homeowners Insurance Cover Earthquakes?

Q: My spouse and I recently purchased a home in an area that’s prone to earthquakes. Our insurance agent told us we might want to consider a separate earthquake insurance policy. Will our standard homeowners insurance be enough? Does home insurance cover earthquakes?

A: Homeowners who live in an area that’s prone to seismic activity might be concerned about earthquake damage. After all, even a small earthquake could cause structural damage to a home. This leaves many homeowners asking, “Does home insurance cover earthquakes?”

In most cases, no, homeowners insurance doesn’t include earthquake coverage. However, some of the best homeowners insurance companies let policyholders add an earthquake endorsement to their standard policies. An earthquake home insurance endorsement—or separate earthquake policy—provides coverage to help rebuild a home after earthquake damage, as well as replace personal belongings damaged or destroyed during a tremor. Additional types of coverage may be available as well, such as loss of use coverage, that can provide further financial protection in the event of seismic activity.

Standard homeowners insurance does not typically cover earthquake damage.

Standard homeowners insurance policies help protect a home against perils such as fire, wind or storm damage, and theft. That insurance typically includes coverage for both the physical structure of the home and the owner’s personal belongings, such as furniture or clothing.

However, it’s unlikely that a standard homeowners insurance policy would cover earthquake damage. According to the Federal Emergency Management Agency (FEMA), insurance companies stopped providing homeowners insurance for earthquake damage due to risk projections that showed a major earthquake could bankrupt them if they continued offering this type of coverage. That being said, many homeowners can still protect their homes from earthquake damage by purchasing endorsements on their homeowners insurance (where available) or separate earthquake insurance coverage as a stand-alone policy.

However, policyholders who live in areas prone to tremors may have the option to add an earthquake endorsement.

Some insurance companies allow policyholders to add earthquake coverage directly to their homeowners insurance policy through an endorsement. An endorsement is an optional add-on to an insurance policy and may also be called an insurance rider. Endorsements help policyholders expand the coverage of their homeowners insurance policy to cover more perils or increase coverage limits. For example, an earthquake endorsement expands the home insurance policy’s coverage to include damage from earthquakes and seismic activity.

If an insurance company offers an earthquake endorsement, the policyholder can generally add it to their existing homeowners insurance coverage for an additional cost. Homeowners may want to be advised, however, that earthquake endorsements also typically come with a separate deductible and coverage limit, so it’s a good idea for them to find out exactly what these endorsements cover and what a potential payout might look like.

Homeowners may also be able to purchase a stand-alone earthquake insurance policy.

An insurance rider to add earthquake coverage to an existing homeowners insurance policy may be the most straightforward way for homeowners to obtain coverage for this type of disaster. However, earthquake insurance is considered specialized coverage, and not all homeowners insurance companies will offer an earthquake endorsement on homeowners insurance. Homeowners may still be able to get coverage through a stand-alone earthquake insurance policy, though. Some of the best earthquake insurance companies offer earthquake policies that can be purchased separately from homeowners insurance.

Like other types of insurance, stand-alone earthquake policies generally have a deductible that must be met before a policyholder can receive a payout on a claim. Homeowners will want to weigh their earthquake insurance deductible options carefully when choosing an insurance policy, since a smaller deductible will lead to larger payouts on claims but will also result in higher insurance rates (and vice versa). Additionally, homeowners may want to shop around, getting quotes from multiple insurance companies, to find affordable earthquake insurance that provides enough coverage for their home and its contents.

In fact, homeowners insurance companies are required by state law to offer some form of earthquake coverage to policyholders in California.

California state law requires insurance companies to offer earthquake coverage to California residents when they purchase homeowners insurance. Additionally, homeowners insurance companies must offer this coverage to California policyholders every other year. The offer must be in writing and include details such as the coverage limits, deductible amount, and cost of insurance premiums.

California homeowners, however, are not required by state law to purchase earthquake insurance. Even homeowners with a mortgage are generally not required to carry earthquake insurance on their home. Many California residents choose not to purchase earthquake insurance, with only 10 percent of homeowners in the state buying earthquake coverage, according to FEMA. The other 90 percent could be putting their home and assets at risk by forgoing earthquake insurance entirely.

Earthquake insurance provides dwelling protection to cover the costs to repair or even rebuild homes damaged by seismic activity.

One of the main benefits of earthquake insurance is that it provides dwelling coverage for a home, which protects the physical structure of the home. If an earthquake causes physical damage to the home, dwelling coverage can help pay to repair the damage or even rebuild the home, minus the homeowner’s deductible.

Additionally, earthquake insurance covers both the physical structure of the home and, in many cases, any attached structures—an attached garage, for example. Some policies may offer additional coverage for separate structures on the property. Known as “other structures” coverage, this additional coverage helps protect structures like garden sheds, fences, and detached garages that sit on the property but are not directly attached to the primary residence.

Policyholders can use their personal property coverage to replace belongings damaged or destroyed during an earthquake.

Homeowners insurance policyholders may recognize personal property coverage as the part of their homeowners insurance that helps replace any damaged belongings after a covered loss. Personal property coverage that comes with earthquake insurance—whether it’s an endorsement or stand-alone policy—functions in much the same way. For instance, if an earthquake causes part of a policyholder’s home to collapse, ruining their living room furniture in the process, then their earthquake insurance policy could help cover the cost of replacing the furniture less the deductible.

Homeowners may want to note that, in general, certain types of property have coverage limits and may not be fully covered under personal property insurance. It may cost more to replace items such as jewelry, sports equipment, musical instruments, and fine art than the policy limits allow. Homeowners may be able to purchase additional coverage for these items, but that option isn’t always available with every earthquake insurance policy.

Loss of use coverage may also be available to help pay additional living expenses if the home is severely damaged and left uninhabitable following an earthquake.

Earthquakes can cause significant damage to a home, potentially rendering it uninhabitable. For instance, an earthquake could shake the foundation of a house and cause deep cracks through the base of the home. In that scenario, a contractor may determine that the structure is no longer stable. The homeowners then have to vacate the premises for their own safety while repairs are made. In that time, they’ll likely have to pay for additional costs such as hotels and restaurants, among other expenses.

The good news is that many earthquake insurance policies offer loss of use coverage either as a standard coverage term or as an endorsement. Loss of use coverage helps pay for additional expenses incurred because a homeowner had to leave their home after a covered loss. Also known as additional living expenses coverage, loss of use protection generally only pays for costs of living above the homeowner’s typical living expenses, but this financial support could be essential for policyholders who suddenly find themselves without a place to live after an earthquake.

However, earthquake insurance does not cover fire or water damage that results from seismic activity—only damage directly caused by the tremor itself.

There are two notable perils that earthquake insurance won’t cover: water damage resulting from flooding and fire damage. Even when a fire or flood is caused directly by an earthquake, most earthquake insurance policies won’t cover that damage, so homeowners will want to read their policy terms closely to fully understand what they are insured for in case of an earthquake.

Earthquake insurance policies exclude fire damage because homeowners generally receive this type of coverage from their standard homeowners insurance policy. For example, if an earthquake causes a gas leak in a home, which leads to an explosion that causes fire and smoke damage throughout the house, the policyholder’s earthquake insurance likely won’t pay out a claim for the cost of repairs. However, a standard homeowners insurance policy likely would cover that fire damage less the deductible.

Water damage from flooding after an earthquake, on the other hand, will likely only be covered by a separate flood insurance policy. Any type of flooding—including floods induced by an earthquake—typically won’t be covered by standard homeowners insurance or an earthquake policy. Homeowners looking for the most comprehensive protection available may also want to consider one of the best flood insurance policies in addition to their homeowners and earthquake insurance.

Earthquake insurance is not limited to single-family homes—owners of mobile homes, manufactured homes, and condos can also purchase coverage to protect their property.

Many types of homes qualify for earthquake coverage in addition to single-family homes. For example, a condo owner can purchase a separate condo earthquake insurance policy to protect their unit in the event it is damaged by seismic activity. Mobile homes, which can sometimes be difficult to insure, also generally have earthquake insurance options available.

Although renters insurance does not cover earthquakes, tenants likely have options to explore as well. Earthquake insurance for renters is commonly available and often covers personal property and loss of use after a covered loss. In general, a renters insurance policy won’t cover damage to the physical structure of the rental property. In cases of physical damage to the structure, the landlord’s homeowners insurance (or in the case of an earthquake, the landlord’s earthquake insurance policy) would be likely to cover repairs.

Obtaining earthquake coverage—either through an endorsement or a stand-alone policy—may be worth it to financially protect homeowners living in high-risk areas.

Homeowners might wonder if earthquake insurance is worth it. The answer often depends on the location of the home. Homeowners in earthquake-prone areas such as California and Washington state may find peace of mind in purchasing earthquake insurance. A robust earthquake insurance policy could help pay for damages that would otherwise not be covered by a standard homeowners insurance policy. On the other hand, homeowners in areas with low seismic activity, such as the upper Midwest, may not get as much value out of an earthquake insurance policy.

Homeowners may also want to consider earthquake insurance costs when deciding on a policy. Earthquake insurance rates tend to be higher for homeowners who live close to a fault line, so they may want to assess the costs and benefits of earthquake insurance to decide whether this type of coverage makes sense with their finances. It’s always a good idea for homeowners to shop around for earthquake policies and compare different providers to find the right protection for their particular situation at a price that they can comfortably afford.