How Many People Have Earthquake Insurance?

Earthquake insurance provides financial protection for property owners against damage resulting from seismic activity. Unlike standard homeowners insurance policies, which typically exclude damage caused by earthquakes, this specialized coverage addresses the repair or replacement costs for homes and personal belongings following a tremor. Many do not realize their regular home insurance does not cover this specific natural disaster, creating a significant protection gap. Understanding earthquake insurance is important for those in seismic areas.

Understanding National Earthquake Insurance Coverage

The prevalence of earthquake insurance coverage among homeowners nationally remains relatively low. A 2020 Triple-I Consumer Poll indicated that approximately 23% of homeowners with standard insurance policies also had earthquake coverage, which was an increase from 15% in 2018. Despite the potential for significant financial losses from seismic events, a substantial portion of the population remains uninsured for this peril. The global trend also shows that earthquake losses are among the least insured natural disaster risks, with a large “protection gap” where economic losses far exceed insured losses.

For instance, between 2010 and 2019, only about 19% of global direct economic losses from earthquakes were covered by insurance, highlighting a protection gap of 81%. This national and global underinsurance suggests that many homeowners could face considerable out-of-pocket expenses for repairs or rebuilding after an earthquake. While there has been a slight upward trend in adoption, the majority of the nation’s housing stock remains unprotected against earthquake-specific damage.

Key Influences on Policy Adoption

Several factors contribute to the varying rates of earthquake insurance adoption across the United States. A primary influence is the perceived risk among homeowners; many underestimate their exposure to earthquake hazards or believe their standard homeowners policy already includes this coverage. The cost of earthquake insurance premiums also plays a significant role, as these policies often come with high deductibles, typically ranging from 5% to 25% of the dwelling’s coverage amount. For example, a home with $400,000 in dwelling coverage and a 5% deductible would require the homeowner to pay the first $20,000 in damages before the insurance coverage begins.

Earthquake insurance must be purchased as a separate policy or an endorsement, as it is not included in standard homeowners policies. This additional step and cost can deter some homeowners, particularly those who do not view earthquake risk as an immediate threat. The expectation of government disaster assistance after a large-scale event can also reduce the perceived need for private insurance, despite the fact that such assistance may not fully cover all losses.

Coverage Differences Across Regions

Earthquake insurance adoption rates vary considerably across different regions of the United States, largely correlating with seismic activity levels. Homeowners in the Western U.S., a region known for higher seismic risk, are more likely to have earthquake insurance compared to other parts of the country. For example, data from 2020 indicated that 28% of homeowners in the West had earthquake insurance, while only 16% in the Midwest had such coverage. This regional disparity underscores how geographic risk influences insurance purchasing decisions.

States like California, Oregon, and Washington, which experience frequent seismic activity, often see higher rates of earthquake insurance policies. Even within these high-risk areas, coverage is not universal. The availability of tailored policies, such as those offered by specific state entities or private insurers focusing on earthquake-prone zones, contributes to these regional differences.

Where Earthquake Insurance Data Comes From

Data regarding earthquake insurance prevalence is compiled and reported through several key sources within the insurance and research communities. Insurance industry associations, such as the Insurance Information Institute (Triple-I), regularly conduct consumer polls and publish reports on insurance adoption rates. These organizations gather data from surveys of homeowners and synthesize information from their member insurance companies.

State insurance departments also play a role in collecting and disseminating data related to policies sold within their jurisdictions. Academic research institutions often conduct independent studies on natural disaster preparedness and insurance coverage, contributing to the overall understanding of the market. Information may also be sourced from re-insurers and catastrophe modeling firms, which analyze risk and policy data to inform their operations and provide industry insights.