What to Know About Earthquake Insurance

When most homeowners think about protecting their property, they focus on fire insurance, flood insurance, or the coverage in their standard homeowners policy. One risk that often gets overlooked is earthquake damage.

The surprising truth is that most homeowners insurance policies do not cover earthquakes. If you live in Washington, this is an important detail to know. Our region is one of the most seismically active in the country, sitting above both the Seattle Fault and the Cascadia Subduction Zone. Scientists agree that it is not a matter of if we will have another major earthquake, it is a matter of when.

In the video below, Ryan Vytlacil, owner of Seattle Seismic, shares what every homeowner should know about earthquake insurance, how it works, why so few people have it, and how retrofitting your home can make it both more affordable and more effective.

Homeowners Insurance and Earthquake Coverage

Many people assume that if an earthquake damages their home, their homeowners policy will cover the repairs. In almost every case, it will not. Earthquake damage is excluded from standard policies.

If you want coverage for earthquakes, you usually have two options. You can ask your insurance company about adding an earthquake rider to your existing policy. Not all companies offer this. The other option is to purchase a separate earthquake insurance policy from a different carrier.

The most important step is to talk with your insurance agent and ask directly if you are covered for earthquake damage. Do not assume you are. If you do have coverage, make sure you understand the details, including the deductible, coverage limits, and any exclusions.

Why So Few Homeowners Carry Earthquake Insurance

Ryan points out that in his conversations with homeowners, almost no one has earthquake coverage as part of their homeowners policy. This is partly because many people do not realize they need it, but also because of cost and qualification requirements.

In many cases, you can’t get earthquake insurance unless your home has been seismically retrofitted.

If you do manage to get a policy without retrofitting, it will usually be very expensive and the terms will not be favorable. Insurance companies employ entire teams whose only job is to analyze risk. They understand that an unretrofitted home in an earthquake-prone area is a high-risk property. They are not going to take on that risk without charging significantly more.

How Retrofitting Affects Insurance

Retrofitting a home does more than make it safer. It can save you a considerable amount of money on insurance. Retrofitting can reduce earthquake insurance premiums by as much as 25 percent. Over the years you own your home, that can add up to thousands of dollars in savings.

Retrofitting strengthens the connection between your home and its foundation, reinforces cripple walls, and adds bracing where needed. These upgrades help prevent your home from sliding off the foundation or collapsing during an earthquake. Because retrofitted homes are less likely to suffer major damage, insurance companies see them as a lower risk, which is why they are willing to offer lower premiums.

The Reality of Deductibles and Coverage

Even with earthquake insurance, you may still be responsible for a large deductible. For example, if your home is valued at $600,000, your deductible could be $90,000. That is because earthquake policy deductibles are often set as a percentage of your home’s insured value, usually between 10 and 20 percent.

While insurance can protect you from the full cost of rebuilding, you should still be prepared for a significant out-of-pocket cost after a major quake.

Retrofitting lowers the chance of severe damage, which helps reduce both the potential repair costs and your insurance premiums.

Lessons from the Nisqually Earthquake

The last major earthquake in the Seattle area was the Nisqually earthquake in 2001. Many homes came through it with little or no serious damage, which has led some homeowners to believe they do not need earthquake insurance or retrofitting. This can be a dangerous assumption.

The Nisqually quake was strong, but it was centered deep underground and on a different fault line than the ones that could cause far more destruction here.

A quake on the Seattle Fault or the Cascadia Subduction Zone could be much closer to the surface and much more powerful in our area. A home that survived Nisqually without damage might not fare the same in a different type of earthquake.

Why Retrofitting Should Come First

If you are considering earthquake insurance, start with retrofitting. In many cases, it is the only way to qualify for a policy. Even if you can get insurance without it, the cost will be higher and the terms less favorable.

There is a reason insurance companies require retrofitting for coverage. These companies have more data on risk than almost anyone, and their goal is to avoid paying out large claims. If they will not cover an unretrofitted home, that tells you something important.

Retrofitting is not just an optional upgrade, it is a proven way to protect your home and lower your financial risk.

The Bottom Line

Earthquake insurance and retrofitting work hand in hand. Insurance provides a financial safety net in case of serious damage, while retrofitting helps prevent that damage in the first place. Without retrofitting, you may not be able to get coverage at all, and if you do, it will likely cost much more.

For homeowners in Washington, taking the time to understand your coverage (or lack of it), is essential. Talk to your insurance agent, learn what your policy does and does not cover, and consider how retrofitting can make both your home and your insurance plan stronger.

As Ryan Vytlacil explains in the video, insurance companies will not take the risk on a vulnerable home. That should be a sign for homeowners to take the same approach. The sooner you retrofit, the sooner you lower your risk, improve your safety, and potentially save money over the long term.