Special earthquake insurance can be necessary to ensure that you home is properly covered in case of direct earthquake damage or damage that occurs in the aftermath of an earthquake. Earthquake damage can be expressly written out of the standard home insurance policy, or simply treated as an Act of God or force majeure by the insurance company, which will leave you without insurance cover unless you also have special earthquake insurance. Since earthquakes can cause enormous damage, having appropriate earthquake insurance is extremely important for homeowners living in areas where damaging earthquakes occur.

It is important to always check the deductible of any earthquake you’re offered, because they are often very high. A very high deductible means that your earthquake insurance might be quite useless in situations where your home or its contents are just a little bit damaged by an earthquake.

In some parts of the world, it can be very difficult to obtain earthquake insurance for several weeks after a medium strong or strong earthquake has impacted an area. This is because the insurance companies are fearing aftershocks and do not want to insure properties that might be damaged by such aftershocks. There is also the fear that the initial earthquake is just a foreshock and that an even larger and potentially more destructive earthquake will follow soon.

The availability of earthquake insurance varies largely around the globe and so do the terms and conditions of earthquake insurance policies. In some earthquake prone areas, the government has stepped in to ensure the availability of affordable earthquake insurance for householders. In Japan, the government created the Japanese Earthquake Reinsurance (JER) as early as 1966. In New Zealand, the Government-owned Crown entity EQC (Earthquake Commission) provides primary disaster insurances to owners of residential properties. EQC has its roots in the Earthquake and War Damage Commission created back in 1945. Through the EQC, it is also possible to obtain insurance cover against other natural disasters, such as floods, tsunamis, volcanic eruptions, landslides, and more.

Earthquake insurance in California, USA

The U.S. state of California is located along the Pacific Ring of Fire and roughly 37,000 earthquakes are recorded in California each year, although most of them are to small to be felt or cause any significant damage. Several faults runs through the sate, including the famous San Andreas Fault that passes within circa 35 miles of Los Angeles. The San Andreas Fault has had several high profile earthquakes in the last 200 years, which has caused significant damage. At least 3,000 people died in the 1906 San Francisco Earthquake and its subsequent fires.

After the 1994 Northridge Earthquake, most insurances companies stopped writing homeowners insurance polices in California since California Law required that all insurance companies offering homeowners insurance had to offer earthquake insurance as well. The 1994 Northridge Earthquake, which occurred on a previously undiscovered fault, caused 57 deaths and over 5,000 injuries. The estimated property damage was $15 billion – $40 billion.

As a result of the insurances companies’ unwillingness to provide homeowners insurance in California after 1994, the law was changed to allow for a “mini policy”. Offering this mini earthquake insurances was now enough to fulfill earthquake policy requirements of the law for any insurance company wanting to sell homeowners insurance in California. With a mini policy, the homeowner is only covered for loss due to structural damage, and the deductible is 15% instead of a fixed-value deductible. Also, claims on personal property losses and loss of use are highly limited.