Protecting your home with earthquake insurance

As a homeowner, you're faced with a number of options to financially protect your home when disaster strikes, including earthquake insurance.

Many states require that you have a homeowners insurance policy, but earthquake coverage can be optional and protection from these natural disasters is not part of a homeowners policy. Even California, which is known for its seismic activity, doesn't require that its residents purchase one of these policies. This is not to say that getting a policy isn't beneficial. While a home inspection can tell you whether your property is at risk due to current damage or other issues, there's no telling when an earthquake will occur.

Look at what is covered under a policy, the price and the risk for your community. If the chances of extensive damage are low, you may save more in the long run by foregoing a policy and paying out of pocket for repairs if an earthquake does occur. However, if you're in an area known for strong or frequent quakes, it's in your best interest to get coverage.

What is protected by earthquake insurance?

When you purchase one of these policies, the structure of your home - and possibly other structures on the property - are financially protected if they are damaged by an earthquake. You may also have coverage for your personal belongings, though this can be capped at a dollar amount instead of a percentage, unlike a homeowners policy.

One caveat of earthquake insurance is that it doesn't cover secondhand damage to the structure of your home. If, for instance, a quake ruptures a water main and your front yard and basement become flooded, any damage that results is not covered. In this and similar cases, it is important to understand what your homeowners policy covers and ensure that you have the appropriate riders attached to your coverage.

What does earthquake insurance cost?

Getting financial protection in the event of a quake is an investment that costs more as the risk increases. This is true of any insurance policy, which means that if you're living on the San Andreas fault, you're going to spend more each month. When disaster does strike, the cost of your premiums may pale in comparison to repair costs.

Conversely, if you're in a low-risk area, you can spend less and have coverage when you need it. Even if you never need to file a claim, you won't waste money on high premiums.