Earthquake Insurance for Renters: Coverage Options

A standard renters policy does not pay for belongings broken in an earthquake or for a place to stay if the quake makes your unit unlivable, but it still covers fire, explosion, and theft that follow the quake. To insure the shaking damage itself, renters can add an earthquake endorsement to their renters policy or buy a separate policy; in California, a California Earthquake Authority (CEA) policy through a participating renters insurer is one option. Expect a deductible set as a percentage of your coverage limit, usually 10% to 20% (the CEA offers 5% to 25%), rather than the flat deductible on your renters policy.

What your renters policy pays after an earthquake

The Insurance Services Office (ISO) forms that many renters policies are built on exclude "earth movement": earthquakes, landslides, mudflows, sinkholes, and other shifting ground. Three exceptions matter after a quake:

• Fire and explosion that follow are covered, such as a fire started by a broken gas line. California law requires both homeowners and renters policies to cover fire caused by or following an earthquake, whether or not you have earthquake coverage.
• Theft is covered, so belongings stolen from a damaged unit are paid like any other theft.
• Loss of use applies only when a covered loss, such as that fire, makes your unit unfit to live in; additional living expenses coverage explains what it pays.

Flooding or a tsunami set off by a quake falls under the water exclusion in your renters policy, and earthquake policies exclude it too; see flood insurance for renters. Your landlord's insurance does not cover your belongings. For the losses a standard policy does pay, see what renters insurance covers.

California: CEA renters policies

You cannot buy directly from the CEA. You buy its renters policy through your renters insurance company or agent, if that company participates with the CEA, and you do not have to wait for your renters policy to renew. California law requires the insurer to offer you earthquake coverage. The CEA policy depends on your renters policy: you must keep a renters policy with the same insurer in force for the whole term, and if none is in force when a loss happens, the CEA policy pays nothing.

The CEA values most covered belongings at replacement cost, the cost to buy a similar new item. Payment cannot exceed the lowest of that cost, what you actually and necessarily spend on repairs or replacements, and the applicable coverage limit or cap for that type of property. It charges one deductible per seismic event, which it defines as the first earthquake plus every quake and aftershock in the 360 hours (15 days) after it.

The CEA says a renters policy could cost as little as $35 a year; your price depends on where you live and the coverage and deductible you choose. Its premium calculator at earthquakeauthority.com gives an estimate.

Example: you choose the $25,000 personal property limit with a 15% deductible, so your deductible is $3,750 ($25,000 x 15%). A quake destroys covered furniture, a TV, and clothes with an $8,000 replacement cost. If you spend that $8,000 on necessary replacements and no lower coverage cap applies, the CEA pays $4,250 ($8,000 - $3,750). Under the same conditions, a 5% deductible ($1,250) would mean a $6,750 payment. If the building is unsafe and you have to move out, loss-of-use coverage pays your necessary extra living costs from the first dollar, up to the limit you chose.

Earthquake endorsements and other separate policies

In California and other states, insurers also sell earthquake coverage as an endorsement (a written change that adds coverage to your renters policy) or as a separate policy. For example, Lemonade offers earthquake coverage as an add-on to its California renters policies. The National Association of Insurance Commissioners (NAIC) describes these common terms:

• Deductible: a percentage of the coverage limit, not of the loss. On a $30,000 personal property limit, a 10% deductible is $3,000.
• Loss of use: you may owe no deductible on extra living expenses, but ask whether the endorsement includes loss of use and what its limit is.
• One event, one deductible: quakes within a 72-hour period typically count as one event, so an aftershock after that window can mean a second claim and a second deductible.
• Exclusions: fire (your renters policy covers it), flood and sewer backup, damage that existed before the quake, and vehicles.
• Price: depends on factors including how quake-prone your area is and the deductible you choose; a larger deductible means a lower premium.

If your insurer does not offer earthquake coverage, the NAIC says it may refer you to another company, or an agent may place it with a surplus lines insurer, which can cover risks that standard insurers will not but comes with fewer consumer protections.

How to choose your coverage

1. Buy before a quake. The NAIC says most insurers stop selling new earthquake coverage for 30 to 60 days after a recent earthquake, and coverage never applies to damage that has already happened. CEA coverage remains available after a quake if you already have a renters policy with a participating insurer. It excludes losses from a seismic event that began before your CEA policy started, including aftershocks within that event's 15-day window.
2. Price your belongings. A home inventory shows whether $5,000 or $25,000 of CEA coverage, or the limit on an endorsement, comes close to what you own, and it supports your claim later.
3. Turn the deductible into dollars. A 25% deductible on $25,000 of coverage means you pay the first $6,250 of damage to your belongings. If you could not cover that, choose a lower percentage.
4. Weigh loss of use separately. Because the CEA charges no deductible on it, this coverage pays even when the damage to your belongings stays below the deductible.
5. Check the sublimits (caps within the personal property limit). If you own a lot of glassware, china, or collectibles, the CEA's $500 breakables limit and $3,000 collectibles limit cap what it pays for them.