Get the facts on earthquake insurance

What does earthquake insurance cover?

Ideally, your earthquake insurance policy covers the cost to replace or repair your damaged property. There are several options to consider when picking a plan, including:

• Does the policy cover only the dwelling? Are accessory structures, such as garages, also included?

• Will your policy pay for the contents of your home and for additional living expenses if your home is badly damaged or destroyed?

• Are there any exclusions or limitations to coverage?

• What deductible must you pay before the insurance kicks in?

How much does earthquake insurance cost?

Earthquake insurance rates are determined differently by each insurance company and can vary widely depending on several rating factors.

Generally, older homes cost more to insure than new homes. Wood homes get better rates than brick ones because wood tends to withstand quake stresses better.

In addition, areas are graded on a scale of 1 to 5 for likelihood of quakes, and this might be reflected in earthquake insurance rates. Because earthquake insurance is a type of catastrophic coverage, most policies carry a high deductible — anywhere from 2 to 20 percent of your replacement coverage limit.

For residents of California, one option is to get insurance through the CEA. The CEA is a state-sponsored private-public partnership providing earthquake insurance to California homeowners, renters and condominium owners. Insurance companies that belong to CEA offer a standard earthquake insurance policy with a 15 percent deductible. There's also a 10 percent deductible policy available. The CEA Web site has a tool to calculate your estimated annual earthquake premium. Californians can also buy earthquake policies outside the CEA.

How much coverage should I buy?

If you ultimately decide to purchase earthquake insurance, remember you should buy enough to cover the costs of rebuilding your house and replacing broken possessions. The amount of insurance you buy should be based on replacement and reconstruction costs, not the market value of your property and possessions.

You should also find out your rights for filing claims before you sign any earthquake insurance policy. It's important to know how much time you have to file a claim following a quake. In some cases, damage from earthquakes is not immediately apparent.

Updated March 7, 2008

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