Earthquake insurance

Standard homeowners policies, including the ISO HO-3, exclude earth movement, and earthquake falls under that exclusion. To be covered you add an earthquake endorsement to the homeowners policy or buy a stand-alone policy. In California, many policies are sold through participating insurers by the California Earthquake Authority, a state-created insurer. Such policies typically cover the dwelling, personal property and living expenses, each with its own limit.

The deductible is where homeowners are often surprised. It is a percentage of the dwelling limit, not of the loss. The California Earthquake Authority offers options of 5%, 10%, 15%, 20% and 25%; other insurers vary. Say a home has a $500,000 dwelling limit and a 15% deductible: you absorb the first $75,000 of covered damage (hypothetical). Small and moderate losses may fall entirely below it.

Know the edges. Fire that follows a quake is generally covered by the homeowners policy as a fire loss. Flood is typically excluded from both policies even when a quake causes it, and landscaping, pools and detached structures are often limited or excluded under the quake policy. The guides on earthquake insurance explained and why earthquake deductibles are so high help you weigh the trade-off.