What is earthquake insurance?

What does earthquake insurance cover?

Earthquake insurance is a policy or endorsement that covers damage to your home resulting from specific seismic events. The coverage will typically specify a time period, usually 72 hours, for what constitutes a single event. Earthquake insurance will usually cover the following, but it’s a good idea to read your policy to confirm: 

• Physical structure: This includes your home and any attached structures. Some policies will extend this coverage to the detached structures on your property, but it’s not guaranteed.
• Personal property: Similar to your home insurance policy, this includes coverage for your clothes, furniture and other items in your home from earthquake damage. However, for valuable items, your earthquake insurance policy may not cover them at their full value. To fully financially protect your expensive items, consider a scheduled personal property endorsement. 
• Additional living expenses: If your home is so damaged after an earthquake that you can no longer live in it, this coverage can help with hotel, restaurant, laundry and other extra bills you may incur as a result of living out of your home. 

It is important to know that your standard homeowners insurance policy doesn’t cover damage from earthquakes. For damage caused by seismic activity, you’ll need an additional endorsement, on your policy. If you live in an especially high-risk area, like California, you may need a separate earthquake insurance policy.

Do I need earthquake insurance?

In most cases, lenders don’t require earthquake insurance as they do homeowner’s insurance. However, it is not because earthquakes are of no concern to homeowners. According to the National Association of Insurance Commissioners (NAIC), 42 of the 50 states are at risk of experiencing an earthquake. That means, for most of us, a risk assessment is essential.

Earthquakes are not uncommon in the U.S., and around 16 earthquakes with a magnitude of 7.0 or higher occur on average each year. The aftermath can lead to expensive building repair and replacement costs. A joint study from the U.S. Geological Survey (USGS) and the Federal Emergency Management Agency (FEMA) found that earthquake damage in the U.S. costs an estimated $14.7 billion each year. 

Another study conducted by the U.S. Geological Survey found that the following 16 states are most at risk for an earthquake:

• Alaska
• Arkansas
• California
• Hawaii
• Idaho
• Illinois 
• Kentucky
• Missouri
• Montana
• Nevada
• Oregon
• South Carolina
• Tennessee
• Utah
• Washington
• Wyoming

What about FEMA disaster assistance after an earthquake?

Many homeowners are hesitant to purchase earthquake insurance for the reasons listed above. Premiums will vary based on risk and location, but across the board, deductibles are higher than what you’d pay on a home insurance claim. Instead of a flat dollar amount, earthquake deductibles are between 10 and 20 percent of your total dwelling limit. So, if your home is insured for $300,000 and you have a 15 percent deductible, you’d be on the hook for $45,000 after an earthquake insurance claim. 

High earthquake deductibles are a common hangup for homeowners on the fence about getting a policy. Many homeowners reason that, if the damage is that bad and widespread (when “The Big One” hits) that FEMA will step in to help. While that’s not incorrect, it’s deeply misleading. The maximum amount of money FEMA can give a household after a natural disaster is $42,500 — not nothing, but certainly not enough to rebuild a home. FEMA can’t pay your deductible directly, but it may be able to help you afford your earthquake insurance deductible if you qualify. FEMA can help you out temporarily, but it isn’t an insurance policy. One of the key benefits of earthquake insurance is having peace of mind that, should the worst happen, what’s likely your largest financial asset is covered.

How common are earthquakes?

2024 has already seen several dozen significant earthquakes around the globe and in the U.S. So far, these earthquakes range from a scale of 3.6 to 7.5, with 3 of them scoring at 7.0 or above. One of the most significant U.S. occurrences, at 5.9 in magnitude, occurred in Port Alexander, Alaska.

Recorded earthquakes worldwide (magnitude 5.0 or greater), 2016-2021

Source: U.S. Geological Survey, “Earthquake Hazards Lists, Maps, and Statistics”

To understand your risk, you'll likely want to combine historical data with predictive maps and expert assessments. Some states, like California, are known to have a high historical risk for earthquakes. More centralized states, like Oklahoma, may see more earthquakes in the future due to disposal of oil-production waste fluids.

How much is earthquake insurance?

Earthquake insurance cost varies greatly depending on your location and other factors. Like with other forms of insurance, the cost of earthquake policies will typically increase based on how at-risk your home is for an earthquake. This means that homeowners in lower-risk areas will typically pay significantly less than homeowners in high-risk areas. 

If you live in California, which has frequent earthquakes, the California Earthquake Authority has resources to help you determine how much earthquake insurance is, including an earthquake premium calculator.

Factors that impact the cost of earthquake insurance

The rate you pay for earthquake insurance is usually determined by your insurance company using specific data about your home and location, including the likelihood of earthquake damage. The NAIC cites rating factors that include the following:

• Your home’s proximity to a seismic zone
• Your home’s age
• Your foundation and construction type (masonry will mostly likely be more expensive to insure)
• The deductible you choose
• The cost to rebuild your home
• Any additional coverage (such as secondary structures)

Just as with your standard policy, your coverage should insure the total rebuilding cost of your home, also known as replacement cost coverage. This is different from your home’s sale or appraisal value. It factors in the costs of construction materials and labor if your home were to need a complete rebuild.

Earthquake risk level has a significant influence on your premium. For instance, a Missouri resident of New Madrid County, situated right on a major fault, would generally pay significantly more for earthquake insurance than a resident of Jackson County, Missouri — where Kansas City is located, far from the New Madrid fault line.

Your deductible also plays a large role in your rate. Your standard policy usually has a predetermined deductible that may range from $250 up to several thousand dollars. Most earthquake insurance deductibles are indicated as a percentage of the rebuild cost, usually between 10 percent and 20 percent of the total rebuild value of the home, so on a policy with $300,000 in dwelling coverage, you might face a deductible as high as $45,000.

If your home doesn’t incur enough damage for a full rebuild, you could be responsible for the entire dwelling repair cost, even with insurance. You might also need to consider your personal property and coverage for any other structures.

Is earthquake insurance worth it?

Not everyone needs earthquake insurance. In some areas of the U.S., the risk of an earthquake or volcanic event is almost nonexistent. Paying even a low annual premium, when compared to the limitations of your coverage and the significant deductible, may not be worth it.

However, many Americans live in high- or moderate-risk zones and may benefit from having earthquake insurance. All it takes is one major event in these areas to cause substantial or even catastrophic damage to your home. You may want to consider what it would cost you to replace your home in the event of an earthquake. Could you afford it? Further, could you absorb the costs of temporary housing or potential damage to your personal property? The price of your premiums may be high if you live in a high-risk area, but they likely won’t be higher than your replacement costs.

To know if earthquake insurance is worth it for you, weigh those costs and seek a thorough risk assessment. It may also be helpful to speak with a licensed insurance agent to help determine whether or not you need additional coverage.

Frequently asked questions