Earthquake Insurance: Percentage Deductibles, What's Covered, and When It Pays
Standard homeowners policies exclude earthquakes. Earthquake coverage is bought separately, usually with a deductible set as a large percentage of the dwelling limit. Here is how it works and how to decide.
Standard homeowners and renters policies generally exclude earth movement, including earthquakes. Coverage is available through separate policies or endorsements. Earthquake insurance is built for major damage: its deductibles are typically a large percentage of the dwelling limit, so it rarely pays for minor cracks.
The short version
- Earthquake damage is generally excluded from standard homeowners policies.
- Earthquake policies and endorsements usually have percentage deductibles, often 10% or more of the dwelling limit, sometimes with options.
- Coverage may include the dwelling, personal property, and loss of use, sometimes with separate limits and deductibles for each.
- Fire following an earthquake is typically covered by a standard homeowners policy, even though the earthquake damage itself isn't.
- Whether it's worth buying depends on your seismic risk, the home's construction, and whether you could rebuild without it.
How the deductible works
A hypothetical home with $500,000 of earthquake dwelling coverage and a 15% deductible ($75,000):
| Earthquake damage to the home | Policy pays |
|---|---|
| $30,000 | $0 |
| $60,000 | $0 |
| $150,000 | $75,000 |
| $400,000 | $325,000 |
Show the numbers behind this chart
| Damage | Policy pays | |
|---|---|---|
| $30k damage | $30,000 | $0 |
| $60k damage | $60,000 | $0 |
| $150k damage | $150,000 | $75,000 |
| $400k damage | $400,000 | $325,000 |
The coverage is designed for the catastrophic case: a home that's badly damaged or destroyed.
What's typically covered
- Dwelling repairs or rebuilding.
- Personal property, sometimes with a separate, smaller limit.
- Loss of use, for living elsewhere during repairs.
- Emergency repairs and building code upgrades, depending on the policy.
Items often excluded or limited: masonry veneer, landscaping, pools, fences, and certain detached structures. Read the policy for specifics.
Factors that affect the decision
- Seismic risk where you live. Earthquake risk exists in many regions, not only the West Coast.
- Construction: older, unreinforced, or soft-story buildings may be more vulnerable. Retrofitting can reduce damage and sometimes premiums.
- Your equity and savings: if a major quake destroyed the home, could you rebuild while still paying the mortgage?
- Federal disaster aid: often limited, and frequently in the form of loans rather than grants.
- Deductible options: lower deductibles cost more.
Condo owners
Condo associations may or may not carry earthquake coverage on the building. If they don't, or if the master policy has a large deductible, owners can be assessed for repairs. Some condo earthquake policies include loss assessment coverage. See condo insurance.
The takeaway
Earthquake insurance is separate from homeowners insurance and built for major losses, with percentage deductibles that can reach tens of thousands of dollars. Weigh your local risk, your home's construction, and your ability to rebuild without coverage. If you buy it, know your deductible in dollars and what parts of the property are excluded.
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