This is very important to clarify.  Earthquake insurance policies typically cover major property damage or loss due to earth movement – sinking, rising or shifting. So earthquake insurance policies typically pay to make repairs to, or replace, possessions damaged as a result of:

• Earthquakes
• Mudslides
• Sinkholes
• Mudflows

Earthquake insurance policies typically split out a homeowner’s loss into two categories – structure (the home) and contents (possessions). 

The cost for earthquake insurance varies widely.  There are two types of costs you will typically have to pay to obtain, and keep, earthquake insurance coverage – the “premium” and the “deductible.” 

Premium:  The policy premium is the amount that you will be required to pay on a regular basis, typically annually, to maintain your earthquake insurance coverage.  Premium amounts vary widely--as little as $500 to in excess of $3,000.  The amount of your premium will depend on several factors including:

• Type and age of your house
• Any “earthquake-proofing” improvements made by the builder or you as the homeowner
• How close you are to fault lines
• What type of soil is your house built on

Deductible:  Most earthquake insurance policies carry a deductible, meaning you will have to pay a certain amount first for repair or replacement of your property (home and or possessions) before the insurance company will pay for any claims you make.  Earthquake insurance deductibles are typically a percentage of the replacement value of the home – meaning how much it would cost to replace your home in the current economy.

Deductibles in earthquake prone areas are typically a minimum of 10 percent of the home’s replacement value. So if it would cost $200,000 to replace your home and your earthquake insurance policy has a 10 percent deductible, you would have to pay the first $10,000 in repair or replacement costs.

It’s important to know how your insurance company applies the deductible because most companies split a homeowner’s property into two separate categories – structure (the physical home) and contents (possessions).  If your company does, then you will have to pay the deductible for EACH category.