Earthquake

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowner’s insurance policies do not cover earthquake damage. Most earthquake insurance policies feature a high deductible, which makes this type of insurance useful if the entire home is destroyed, but not useful if the home is merely damaged. Rates depend on location and the probability of an earthquake loss. Rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick. In the past, earthquake loss was assessed using a collection of mass inventory data and was based mostly on experts’ opinions. Today it is estimated using a Damage Ratio (DR), a ratio of the earthquake damage money amount to the total value of a building.[1] Another method is the use of HAZUS, a computerized procedure for loss estimation. As with flood insurance or insurance on damage from a hurricane or other large-scale disasters, insurance companies must be careful when assigning this type of insurance, because an earthquake strong enough to destroy one home will probably destroy dozens of homes in the same area. If one company has written insurance policies on a large number of homes in a particular city, then a devastating earthquake will quickly drain all the company’s resources. Insurance companies devote much study and effort to risk management to avoid such cases.

FAQ

Most frequent questions and answers

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage.

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage.

Your homeowner’s insurance does not cover earthquake damage (except fire – California law says that both homeowners renters insurance must cover fire damage that is caused by or follows an earthquake. This means that the fire damage is covered, whether or not you have earthquake insurance).

Premiums for earthquake insurance range from $800 to $5,000 annually, and deductibles are typically 15 percent of the total value of the home. California houses aren’t cheap –- the current median sale price is just under $400,000 and is higher in many of the counties most at risk.