Should You Buy Earthquake Insurance?

Earthquake insurance is typically part of an insurance policy. It works more like a special feature and can be purchased by both private individuals and companies. In the event an earthquake occurs, that home or business may not be covered under a traditional property policy. Only if the policy includes an earthquake clause will the insurance company cover the losses. When you are deciding whether to purchase earthquake insurance, consider your location, your ability to pay and your insurance policy.


If you are located in a high risk earthquake zone, you may be required to purchase earthquake insurance. This is not required at the state or federal level. However, the requirement often comes from your investors or lenders. For example, your mortgage lender may require you purchase an earthquake line of coverage. If you own multiple properties, your policy may reflect the earthquake zone of each of your properties and require you to buy insurance for those properties in high risk locations. Even if you are not required to do so by your lender or another party, you may consider doing so if you feel you are at risk of large loss due to earthquake.

Ability to Pay

Even if you stand to lose assets and suffer damages in an earthquake, you may choose not to purchase the insurance based on your ability to pay in the case this should occur. Earthquakes are rare and it is unlikely you will experience substantial losses. The question you should ask is, "can I pay for the damages if one loss should occur?" If you believe you can easily pay, then it may be worth risking not having the insurance. If no claim occurs, you will end up saving thousands of dollars. However, if you do not have the cash on hand to rebuild your home or business after an earthquake, you must purchase insurance. Paying a little each month is the only way to protect yourself from total loss if a claim does occur.

Your Insurance Policy 

Before opting to purchase earthquake insurance, consider what your policy already covers, should an earthquake occur. You may find that damages to your roof, plumbing and electricity would be covered under a hazard line. You would only be "out of luck" if your foundation cracked. In this case, you may be willing to take a slightly higher risk with not purchasing insurance.

You may also consider what your policy would cover if your property was completely destroyed in an earthquake. Often, a policy will pick up this claim even if it will not pick up minor damages. If you are comfortable covering your own small losses, choosing not to buy earthquake insurance can be a wise financial decision. On the other hand, you may find your policy completely omits damage due to earthquake unless you specifically purchase the coverage. In that case, you should purchase the inclusion of earthquake insurance, depending on your exposure area.

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