Most home insurance policies do not provide protection against the damages that earthquakes can cause. For homeowners in areas that are prone to earthquakes, and even those with a history of quakes—no matter how rare—should consider the benefits of earthquake insurance.
With the protection of a traditional home insurance policy, the foundation damage and wall damage caused by an earthquake, as well as the value of any contents that are destroyed, would likely not be covered. Instead, an insured would have to pay out of pocket to repair and replace anything damaged. Earthquake insurance through a separate policy or as a rider on your home policy, offers you an easy way to provide an affordable layer of insurance protection that only comes into play when an earthquake strikes.
As with other insurance policies earthquake insurance has an annual deductible that you must pay before damages will be covered. Deductibles may be based on a percentage of the policy’s total limits, which can be a substantial amount and one that insureds must prepare for. Additionally, the policy will have limits that determine the maximum your policy will pay. Just as they are with traditional home insurance, earthquake policy limits should be based on the cost to rebuild your home and not on the sale price or estimated value. Premium costs for your policy will be determined by evaluating many factors including your home’s location, date of construction and the construction materials.
Having earthquake insurance does not mitigate the need for flood insurance. For example, if an earthquake causes a tidal wave, which, in turn, creates flood conditions, that damage would only be covered by a flood insurance policy.