The Math of Earthquake Insurance

For consumers Earthquake Insurance can protect you and your family from the devastating financial costs of rebuilding a structure, often an owner occupied home. These costs are significant. Understanding the different protections available can significantly help protect you and your loved ones. It is important to understand that Land Movement, including earthquake is NOT covered by a standard home insurance policy.

From purely a structural standpoint, EQ insurance policies are similar to, but not the exact same as Homeowners policies. However the general categorization of the types of coverages feels the same.

Coverage A / Main Structure:

Coverage A is often seen as the most important type of coverage on an Earthquake policy and it is for good reason. Main structure is there to rebuild the house itself including the roof, foundation, interior and exterior walls. It may include the garage if the garage is considered attached.

Coverage B / Other Structures:

Other structures coverage with Earthquake Insurance can potentially include driveways, separate garages, retaining walls. However care should be taken in assuming the other structures will cover “all other structures” as a typical policy can be limited in regards to certain types of structures. Pools can sometimes be subject to significant sublimit here.

ADUs or accessory dwelling units if present on the property should thoroughly be researched to confirm that they too are covered.

Coverage C / Personal Property:

Personal property can also be covered under most earthquake insurance policies. Personal property can include articles such as clothing, tools, furniture, electronics, dishes, etc that are all used for personal use. For those that have collections or significant breakables – a careful assessment of coverages for these types of items should be done to insure property seismic coverage.

For consumers that already insure certain high value items on their home insurance policy – you may want to speak with your home insurer in regards to see if these high value items are already covered for the peril of earthquake.

Coverage D / Loss of Use:

If your house breaks apart during and earthquake, where will you sleep while you rebuild your home? How will you have the funds to pay hotel and apartment rentals? Enter Loss of Use coverage. Loss of use is one of those financial coverages that may not get the respect that it deserves form the general public, but it should.

One of the most important things to understand loss of use coverage is that it is limited by its financial coverage amount AND a time period. The Earthquake Insurer will only pay out money for as long as the contract states that it is required to do so.

Other Earthquake Coverages:

Are there other coverages on EQ policies – yes, but these are the big four, the prevalent ones that mostly help in deriving the annual premium.

All Coverages are Not Available on All Earthquake Forms:

One important note is that the so called “standard” earthquake policies does not include much or any coverage for Other Structures, Personal Property, and Loss of use. In other words many standard EQ policies are just there to protect the cost to rebuild the building, virtually nothing more.

So called “comprehensive” earthquake policies may provide these coverages. Some carriers even have a second comprehensive category, such as a “comprehensive plus” category as well.

Some insurers allow consumers to set more specific coverage for Loss of Use, Other Structures, and Personal Property which sometimes can result in an optimal insurance outcome.