Earthquake damage is not included under most insurance policies, but separate coverage is available, and can be added to most home or business insurance policies.
Rates vary based on your home’s construction and where you live. Here in Massachusetts, earthquake insurance runs about $20 - $30 per hundred thousand of coverage on your home; thus a $500,000 home could add earthquake coverage for about $120 – $150 If you have stucco or other fragile construction, costs are marginally higher.
Because earthquakes violate the insurance law of “spread of risk”, companies must take different steps from being overwhelmed by losses in a given geographic area. Most earthquake deductibles are at 5% of the value of the home; so in the same $500,000 example, the insurance company will pay only for damages over $25,000. This allows the company to minimize its exposure to many smaller losses, while focusing on the really big ones.
This combination of large deductibles and many consumers watching their nickels and dimes means many people choose not to insure for earthquake damage. We are not in the business of predicting the future, but we do know that those folks who do buy coverage will be glad they did if a big one hits here again.
