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Do you need earthquake insurance?

John Egan

Across the country Oct. 18, millions of Americans participated in the annual ShakeOut earthquake drill. Recent quakes in the Washington, D.C., and Gulf Coast regions heightened interest in the drill – and have heightened interest in earthquake insurance.

Most homeowner’s insurance and renter’s insurance policies don’t cover earthquake damage. If your coverage excludes quakes, you’ve got to buy a separate earthquake insurance policy.

“Without earthquake insurance to help you recover from catastrophic damage, you will be responsible for all costs to repair or rebuild your home and replace your personal property, and to live and eat elsewhere while your home is being repaired or rebuilt,” says D’Anne Ousley, a spokeswoman for the California Earthquake Authority, a publicly run, privately funded provider of earthquake insurance.

More than 1.1 million earthquake insurance policies are in effect in California, which is at the epicenter of quake coverage. California has 70 percent of America’s earthquake risk, but only about 10 percent of Californians are covered by earthquake insurance.

So, if you don’t live in California, why should you even give a second thought to earthquake insurance? Since 1900, quakes have occurred in 39 states and have caused damage in all 50 states, according to the Insurance Information Institute. Around the country, about 5,000 quakes are felt each year.

A repeat of San Francisco’s massive 7.8-magnitude earthquake in 1906 could cause as much as $100 billion in insured damage, according to the Insurance Information Institute.

“It’s a fact that all federal taxpayers are seriously exposed to the massive costs of earthquake damage. Because too few households can afford earthquake coverage, we know that when individuals can’t afford to rebuild, the federal government is asked to help,” Glenn Pomeroy, CEO of the California Earthquake Authority, said in a 2011 news release.

Amy Bach, executive director of United Policyholders, an advocacy and education group, says that if your area has earthquake faults or if coverage is relatively cheap in your area, earthquake insurance is worth considering. Bach says an earthquake policy should provide at least one year’s worth of temporary rent, plus enough coverage to pay for significant home repairs above a 10 percent or 15 percent deductible.

The cost of earthquake insurance depends on where you live, which materials were used to build your home, when your home was built, how many stories it has, what type of foundation it has and what your deductible is, Ousley says. In California, the average premium for an earthquake policy sold by the California Earthquake Authority is $794 a year, she says.

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