Earthquake Insurance Coverage Gaps Leave Millions in 42 States at Risk

According to data from the Insurance Information Institute (Triple-I), millions of residents across 42 U.S. states face considerable risk from earthquake damage, yet earthquake insurance penetration remains low. Standard homeowners and commercial insurance policies generally exclude coverage for earthquake events. However, damages secondary to earthquakes, such as fire or water damage from ruptured gas lines or water pipes, may be covered under these standard policies. Additionally, policyholders typically can claim business interruption or additional living expenses related to an earthquake event if stipulated in their policies.

To ensure protection against structural damage or losses directly resulting from an earthquake, insured parties must acquire specific coverage through either endorsements added to existing policies or separate earthquake insurance policies. This distinction highlights a regulatory and market gap where property owners might assume they are covered for earthquakes when in reality, explicit earthquake coverage is necessary.

The limited uptake of earthquake insurance arises partly due to the perception of earthquake risk and cost considerations associated with purchasing additional coverage. Insurance professionals and carriers face the ongoing challenge of educating consumers on the coverage limitations of standard policies versus the benefits of specialized earthquake insurance products.

From a market perspective, the need to address protection gaps in earthquake-prone states is critical to managing catastrophic risk exposure. Insurers are exploring product innovations and risk mitigation strategies, which could influence underwriting practices and regulatory discussions on coverage mandates in high-risk zones.

As the earthquake risk landscape evolves, insurance providers and brokers must remain vigilant in compliance and disclosure requirements while advocating for clearer communication on earthquake insurance options. This is integral to maintaining market stability and ensuring consumer preparedness in seismic event scenarios.