In 2024, more areas of the U.S. experienced earthquakes, leading some homeowners to face what Alaskans and Californians live through and fear: earthquake damage to their homes.
“Many of them saw lawyers after their homeowners insurance denied their claims, considering themselves victims of insurance bad faith, and were surprised to learn that was not the case,” says Shant Karnikian, a Los Angeles attorney — and a friend of this column. “This led to a lot of yelling at claims adjusters and insurance agents. So, our firm and many others across the country want to educate the public on the importance of looking into buying earthquake insurance.”
Karnikian is managing partner at Kabateck LLP, one of the nation’s most successful mass disasters, personal injury and insurance bad faith claims law firms. Along with associate counsel Annie Martin-McDonough, they asked for my help in getting this important message out.
“Several areas of the country have experienced earthquakes caused by the injection of wastewater from oil and gas operations,” Karnikian notes.
Martin-McDonough points out, “This year’s uptick in earthquake activity underscores the inherent risks of living in seismically active or oil-and-gas-producing regions and the importance of earthquake preparedness.”
I asked them to discuss what earthquake insurance covers — and, perhaps more important, what it doesn’t.
Martin-McDonough: A common misconception is that homeowners insurance covers all natural disasters, including earthquakes.
Standard homeowners insurance policies do not cover earthquake damage. A separate earthquake insurance policy is required to protect against the financial impact of earthquake-related losses.
Karnikian: Standard homeowners insurance typically covers events like fire, theft and certain types of water damage. Earthquakes, however, are excluded — because most policies explicitly exclude coverage for damage from earth movement.
When an earthquake strikes, it can cause sudden, extensive structural damage, including cracked foundations and collapsed buildings, and it can impact entire communities at once, leading to billions of dollars in damages.
Insurance companies avoid covering earthquake damage in standard policies due to the risk of large-scale financial losses. If insurance companies were forced to cover the risk of earthquakes under standard policies, it would likely result in much higher premiums for all policyholders.
Instead, homeowners have the option to purchase separate earthquake insurance policies.
Martin-McDonough: What does earthquake insurance cover? Earthquake insurance covers losses caused by the ground shaking, shifting and cracking. Earthquake insurance policies typically cover:
- Damage to dwellings. It protects the structural components of your home, such as the walls, roof and foundation, against damage caused by an earthquake. Depending on the policy’s terms, dwelling coverage also extends to attached structures, like garages or decks.
- Personal property. This includes belongings inside the home — furniture, electronics and other personal property that may be damaged or destroyed during a quake. Some policies offer set limits on specific categories of belongings, so high-value items like jewelry, art or collectibles may have sublimits or may need additional coverage.
Earthquake insurance typically does not cover damage to landscaping, vehicles, external structures or damage caused by pre-existing structural issues.
Karnikian: Loss of use/additional living expenses (ALE) is a large policy benefit.
If the quake renders your home uninhabitable, this coverage pays for temporary living expenses, such as hotel bills or rental costs during repairs, if your home can be repaired. ALE usually has a set limit and time frame, so it is important to understand how long this support will last, as it could take many months to repair the damage.
Martin-McDonough: It is important to understand your premiums, deductibles and policy limits, as earthquake insurance can be a significant financial investment. Potential policyholders should weigh its cost against the expense of repairing or replacing their homes and belongings.
Here are some key factors that influence the cost of earthquake insurance:
- Premiums vary widely. Depending on a home’s proximity to known fault lines — or oil-and-gas-producing areas — homeowners face higher premiums due to the increased likelihood of earthquake damage. In addition, older homes, especially those without retrofitting, may face higher premiums due to the higher likelihood of damage during an earthquake.
- Deductibles work differently than other insurance deductibles. Earthquake insurance deductibles are different than the fixed amount in a standard homeowners insurance policy and typically range from 10% to 25% of the home’s insured value. This means that in the event of a claim, policyholders will pay a substantial portion of the repair costs out-of-pocket.
Karnikian: Be proactive. Document! Take photos and videos before you need them.
One of the most important things homeowners can do to support a future insurance claim is to create a comprehensive home inventory that includes:
- Belongings with descriptions and photos.
- Purchase prices, receipts, warranty booklets and things that make it easier to substantiate losses. Keeping this inventory up-to-date also ensures that policyholders have an accurate record of their possessions.
- Photograph and document the home’s condition by creating a detailed video of the physical structure and contents in closets, drawers — everything.
Homeowners should also review and understand the terms and coverage details of both your homeowners and earthquake insurance policies. This will help in understanding what is needed to prove your loss and avoiding surprises during the claim process.
Also, many earthquake insurance policies offer lower premiums or higher payout potential for homes retrofitted to withstand earthquakes. If a homeowner makes these upgrades, it is critical to save all receipts, permits and certifications related to the work.
Save records in a secure, accessible location
Back up all photos, videos, receipts and documents and store them physically (for example, in a safe-deposit box at a financial institution) and digitally to the cloud.
Earthquake insurance is a critical component of preparedness, and understanding the scope of coverage, policy limits and deductibles can prevent financial devastation in the wake of a seismic event.
Concluding our interview, both lawyers stressed the importance of meeting with your insurance agent or broker and analyzing if earthquake insurance is something that you can afford and truly need.
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
