Earthquake insurance: sturdier home coverage

Disaster area
  • Your existing homeowners policy won't cover direct damage from earthquakes.
  • Earthquake insurance can cost exponentially more in high-risk states.
  • You may need extra earthquake coverage for fine art or post-quake living expenses.

An earthquake may shake your home's foundation, but it doesn't have to rattle your financial footing if you safeguard with the right insurance. Your homeowners policy won't be enough.

About 81 percent of the world's biggest earthquakes occur along the Pacific earthquake belt nicknamed the "Ring of Fire," part of which runs up the West Coast from Southern California to Alaska, according to the U.S. Geological Survey. But quakes do happen in other parts of the U.S., such as two that occurred last year. One was centered in Virginia, and another in Oklahoma, which was that state's largest earthquake in modern times, according to the Oklahoma Geological Survey.

Most U.S. households don't carry insurance that will cover earthquake damage. Industry groups say half the losses from the Virginia quake were uninsured, while less than 1 percent of Oklahomans had the proper insurance for a quake. Even in California, which has the highest earthquake risk in the country, only 12 percent of households carry earthquake insurance, according to the Insurance Information Institute.

"That's its own disaster waiting to happen," says Glenn Pomeroy, CEO of the California Earthquake Authority, a nonprofit, privately funded insurer set up by the state government.

Here are five things to know about obtaining and benefiting from earthquake insurance.

Get covered!

No conventional homeowners policy covers direct damage from Earth movement, which includes earthquakes, landslides and sinkholes, says Chris Hackett, director of personal lines policy at the Property Casualty Insurers Association of America. Homeowners interested in getting earthquake coverage will either need to see if their current insurer offers a rider on their homeowners policy or search for a separate policy altogether.

Earthquake coverage is offered by major insurers including State Farm, Travelers and Liberty Mutual. The Insurance Information Institute reports that the largest writer of earthquake insurance is the California Earthquake Authority, or CEA, created after insurers fled the state following the 1994 earthquake in Northridge that caused $10 billion in losses.

Earthquake insurance premiums could exceed the cost of your homeowners policy in high-risk regions, the CEA's Pomeroy says. Annual coverage rates in California average about $2 per $1,000 of coverage, while premiums in lower-risk states can cost as little as 50 cents per $1,000.

Don't settle for a high premium

If the price for earthquake insurance is daunting, there are ways to reduce costs. For example, the CEA offers a 5 percent discount to California residents who retrofit their existing homes to make them more shake-resistant, Pomeroy says. Such improvements include bolting or bracing the structure to the foundation. Homes built after 1979, when stricter building codes were enacted across the state, may also get lower premiums.

Insurers may offer lower premiums on wood-frame homes versus ones made of brick or masonry, says Hackett. Frame homes typically can withstand shaking better, whereas brick or masonry homes aren't able to flex with the movement and can crack.


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