Earthquake Insurance
Do I need earthquake insurance?
While earthquake insurance is not mandated by law in California, and most mortgage lenders do not require it, it is important to consider. Standard homeowners insurance policies typically do not cover earthquake damage. To ensure that you can pay for repairs and additional living expenses following an earthquake, a separate earthquake policy is essential.
What’s covered?
Earthquake insurance generally covers the following:
Your Home or Dwelling: Coverage matches the dwelling limit on your homeowners policy.
Personal Property: This includes your belongings, such as TVs, furniture, and more.
Loss of Use: If your home becomes uninhabitable due to earthquake damage, this covers additional living expenses (for rental properties, it includes fair rental value).
Building Code Upgrade: This helps cover costs incurred to meet current building codes when rebuilding after an earthquake.
For condo policies, the above coverage applies, but it will only cover the interior of your condo unit. The HOA is responsible for obtaining earthquake insurance to cover the exterior of the building.
For renters, the focus will be on personal property coverage and additional living expenses after an earthquake, making earthquake premiums more affordable since dwelling coverage does not apply.
Is it worth it?
The cost of earthquake insurance can vary significantly based on the risk level of your area. For instance, San Francisco has a higher earthquake risk than Sacramento, resulting in much higher premiums in San Francisco. In some cases, earthquake insurance premiums can be two to three times higher than standard homeowners premiums.'
Considerations and limitations
While earthquake insurance can provide valuable protection, it’s important to be aware of some limitations:
Coverage Limits: Policies may have caps on coverage amounts, although dwelling coverage typically matches the homeowners policy.
High Deductibles: Deductibles can range from 5% to 25%, with a standard deductible around 15%. Choosing a higher deductible can lower your premiums. For example, if your dwelling coverage is $600,000 and your earthquake policy has a 15% deductible, you would need to incur over $90,000 in earthquake damage before your coverage kicks in.
How do I get earthquake insurance?
There are three main options for obtaining earthquake insurance:
California Earthquake Authority (CEA): You must have your home or property insurance with a participating insurer to be eligible.
Endorsement on Your Homeowners Policy: If your insurer does not partner with the CEA, you may be able to add earthquake coverage as an endorsement to your homeowners policy.
Standalone Earthquake Insurance Carrier: Some companies specialize in providing earthquake insurance for residential properties, often offering more comprehensive coverage.
When your home or property insurance policy renews, you will receive an earthquake insurance offer. It’s a good idea to review this and obtain a premium indication for earthquake coverage.