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Key takeaways:
- Your standard homeowners insurance does not cover damage directly caused by earthquakes or flooding; you need separate coverage.
- Whether the cost of earthquake or flood insurance is worth it depends on several things, including your location, mortgage requirements, and other factors.
- Covering the cost of repairs from earthquake or flood damage can be tricky; talk with an insurance broker to make sure you have the right policy for you.
Did you know that your homeowners insurance does not cover damage caused by floods or earthquakes? This means that if your house slides off its foundation in the next quake, or if heavy rains or snow melt cause water to flow through your living room, you’ll be left holding the bill for repairs. To fully protect yourself, you need separate earthquake and flood insurance policies.
While most mortgage lenders require that you get separate flood insurance if your home is in a high-risk flood area, earthquake insurance is usually not mandatory. And if you don’t have a mortgage, you are not required to get either. But even when they’re not required, these extra insurance policies may be a good idea.
Here’s how to know if earthquake or flood insurance is right for you.
Is it worth getting earthquake or flood insurance?
Whether the cost of earthquake or flood insurance is worth it to you depends on a lot of factors.
Location matters. Flood insurance is required by mortgage lenders in high-risk areas; some also require borrowers to purchase flood insurance in medium-to-low-risk locations. But even if it’s not required, it may be worth it since more than 20 percent of flood damage claims come from outside areas of the highest risk.i Plus, it doesn’t take much water to cause damage; just one inch could cost you tens of thousands of dollars in repairs.
If you live in a high seismic area, earthquake coverage is well worth a look. The U.S. Geological Survey has a map that shows the seismic hazard for your area. If your home is constructed with brick or stone, built on a raised foundation, or is not retrofitted specifically to withstand the shaking from a quake, it’s more likely to get damaged. Earthquake insurance may be added to your existing homeowners policy or purchased through a separate company, depending on your insurer.
For both types of coverage, it’s a good idea to check with an insurance broker to learn about your options.
What do earthquake and flood insurance actually cover?
This gets tricky. Damage directly caused by the earthquake or flooding is only covered by that specific policy, but if the event causes something else—a fire, for example—then your regular homeowners policy or other coverage kicks in. For instance, if an earthquake causes water to flow into your home, you’d need flood coverage. But if water damage is caused by something other than a flood—a burst water pipe, for example—the damage is usually covered by your regular homeowners policy. The good news is that damage to your car from a flood or earthquake is typically covered by your auto policy.
Flood insurance
You can buy flood insurance to pay for damage to your home and contents; these are two separate types of coverage, and you can get either or both. Building coverage pays for damage to your home’s structure along with things that are installed, like heating and plumbing systems, cabinetry, and appliances. Contents coverage pays for damage to your personal belongings inside.
Things like basement improvements (flooring, finished walls, bath fixtures) and generators are often excluded from coverage. In addition, flood insurance doesn’t cover things like sewer backups unless the cause of the backup is flooding, not failure of your sewer system or septic tank. And if a leaky pipe inside your home causes water damage, that’s usually covered under your homeowners policy, not your flood insurance.
Earthquake insurance
This insurance covers damage caused by the earthquake itself—structural damage to your home, a cracked foundation, or a crumbled chimney, for example. But if the earthquake causes a fire, your repairs from the fire damage will be covered under your regular homeowners policy.
There are three levels of coverage. Dwelling coverage protects your home, personal property covers the items inside the home, and a third type of coverage pays for your living expenses if you need to live elsewhere while your home is being repaired. Coverage for detached garages or other buildings may be separate.
Sinkholes, landslides, and mudslides are typically not covered but check with your policy provider. External structures, like a detached garage or a pool, may also not be covered.
A note about deductibles
Flood coverage can’t be automatically added under your existing homeowners insurance; it’s a separate policy with its own rules and deductibles. Deductibles are usually a flat fee, like $1,000, $5,000, or $10,000.
Depending on your insurer, earthquake coverage may be added to your existing homeowners coverage, or it can be added as a separate policy. Either way, though, it will have a separate deductible. Deductibles for earthquake insurance are often much higher than for typical homeowners insurance. The deductibles vary, based on what the policy covers, and are usually calculated as a percentage of the damage. For example, if you have earthquake coverage for a dwelling with a 15% deductible and the earthquake causes $100,000 in damage to your home, you will have to pay $15,000 and the policy would cover the remaining $85,000 for repairs. You will need to pay a separate deductible for your personal property coverage.
When coverage applies
You can request flood and/or earthquake coverage any time, but it is important to keep in mind that most carriers will impose a binding restriction after an earthquake or flood event that will limit the ability to place coverage for a temporary length of time.
How much do earthquake and flood insurance cost?
The cost of coverage depends a lot on where you live. If you live next to a river or along a fault line, your premiums will be higher.
The average cost of flood insurance through the National Flood Insurance Program (NFIP) was $859 per yearii, about $72 per month, and the national average for earthquake insurance was similar, at about $800 per yeariii. However, coverage for both can cost much more in high-risk areas; earthquake coverage in places like California can be significantly higher, for example. The only way to know for sure is to get a firm quote for your property.
There are things you can do to help reduce the annual cost of both earthquake and flood insurance.
- Choose a higher deductible, which will reduce your premium. You may also benefit by bundling the coverage with your existing homeowners policy.
- Have a qualified contractor bolt your home’s structure to the foundation to protect it during an earthquake. You can also brace the chimney and water heater and install automatic gas cut-off valves.
- Elevate your home’s utilities (furnace, water heaters, electrical panels, etc.) to protect them from flooding.
How much earthquake or flood insurance do I need?
Your goal should be to have enough coverage to have your home fully rebuilt if needed, and enough to replace the belongings inside if they are lost. This is especially true for earthquake coverage since structural damage from a seismic event can be extensive. But remember, this is the cost to rebuild, not your home’s market value. If your lender requires that you purchase flood insurance, don’t assume that their requirement will be enough.
What if I’ve paid off my mortgage?
Once you’ve paid off your mortgage, you are not required to carry any type of hazard insurance such as earthquake or flood coverage. But that doesn’t mean it’s not a good idea. In fact, since you have full equity in your home, you have even more incentive to make sure it’s covered in case of a disaster.
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When deciding whether you need earthquake or flood insurance, consider your risk, the cost of coverage, and your ability to cover the costs of repair or full replacement if something happens. In other words, balance what you have to lose against how much you can afford to pay for protection.
