What is earthquake insurance?

Well, it's more than insurance that covers losses to your property in the event of a quake. It also covers losses that can result from sinkholes, mudslides, landslides, and other shifts in the earth.

Earthquake insurance is available for:

• single-family homes
• mobile homes
• condominiums
• renters

Why buy earthquake Insurance?

A basic homeowner's insurance policy does not cover earthquakes or damages that can occur when the earth moves.

If you are in a high-risk area (see below), your lender may require you to buy earthquake insurance before approving your loan.

If your lender doesn't require earthquake insurance, it's still a good idea to know your earthquake risks -- even if you are not buying property in California or another high-risk state. Fault zones have been identified in many areas of the U.S.

We suggest that you:

What's covered?

Most basic earthquake insurance policies cover only the structure of your home. However, you can often buy these other types of coverage for an extra fee:

What's not covered?

All earthquake policies have items that are not covered. However, policies can vary. Be sure to read your policy carefully to understand what items will and will not be covered.

Generally, here's what is not covered:

Earthquake policies also limit coverage on damages to computers, printers, and other electronic equipment. Limits also exist on money, bank notes, coins and metals that are lost or damaged due to an earthquake.

How much does it cost?

Earthquake coverage options and costs vary from one insurance company to the next. However, most companies look at these factors to determine your rate:

• seismic risk (the odds of an earthquake in your area)
• computer modeling that predicts the level of earthquake damage in your area
• territory rating ZIP codes with similar seismic risk
• your home's characteristics
  • slab or raised foundation
  • one-story or multiple stories
  • wood frame construction or unreinforced masonry
  • year built

If your property is located in California, you can estimate your cost by using the California Earthquake Authority's premium calculator.

Contact your insurance agent for an exact quote. Or, find an agent in your area if you don't already have one.

Ask about these policies and discounts:

• Mini policy - available in California. Covers only basic dwelling.
• Retrofit discount - available to certain homes that have been altered to withstand an earthquake.

Smart Tips

• Insurance agencies may stop issuing new earthquake policies in your area if it has an earthquake. If you think you need earthquake coverage, don't wait until an earthquake strikes.
• Check your regular homeowner insurance policy to determine your home's insured value. This value will also determine your earthquake policy coverage. If your home is under-insured on your regular homeowner's policy, your earthquake coverage will be inadequate too.
• Understand how your deductible works. Earthquake insurance deductibles can be anywhere from 10 to 25% of the insured value of your home. If the insured value of your home is $400,000 and you have a 10% deductible, your share of the damage or loss will be $40,000 (400,000 x 10% = $40,000).
• Your policy will pay up to $360,000. If your house sustains $36,000 in damages, your policy will pay nothing, since the cost of damage is less than your deductible.
• You should have enough earthquake coverage to rebuild your home if it is destroyed by an earthquake. Ask construction professionals in your area how much it costs to build a new home per square foot. Multiply this rate times your home's square footage to estimate your coverage needs.
• Ask that your policy include a guaranteed replacement cost provision, which would ensure that your home will be rebuilt even if the costs exceed the coverage that your policy provides. Also ask if the provision has limits.