Standard homeowner’s insurance won’t cover earthquakes, so coverage must be purchased separately.
“Many insurance companies stopped insuring earthquakes in the 1990s after projections suggested that a major earthquake could potentially bankrupt them,” FEMA advises on its website.
Instead, companies only cover fires started by earthquakes, according to the California Department of Insurance.
You’ve probably noticed that your home or renter’s insurance offers special earthquake insurance once every two years, but policy holders only have 30 days after the offer is mailed to accept it.
Instead, most earthquake coverage in California is provided by the California Earthquake Authority, though KTLA’s consumer finance expert David Lazarus notes that it’s “very expensive” and “comes with a very high deductible.”
“Even though homeowners are paying premiums into the system to cover themselves in the event of a disastrous quake, the Earthquake Authority said it will cover as many claims as it can — until it runs out of money, which potentially leaves a lot of people high and dry,” Lazarus said.
Furthermore, the cost of rebuilding is likely a lot higher than you’d expect — and higher than what your insurance company is contracted to pay out. With potentially millions of people needing the same contractors, workers, lumber and other supplies, prices will skyrocket, Lazarus said.
Instead, he suggests paying a little extra on your insurance to add a rider that allows for higher rebuilding costs due to the price of materials.
“California homeowners roll the dice every single day, because yes, we live in a wonderful place with wonderful standards of living, wonderful quality of life,” he said. “The reality is, we’re due for a big one, and anyone who doesn’t think that isn’t paying attention.”