How Earthquake Insurance Works in Canada
TL;DR What is earthquake insurance?
Earthquake insurance is an optional add-on for home insurance policies that covers damage to your home caused by earthquakes.
Earthquake damage is not covered by standard home insurance, so earthquake coverage endorsements may be a valuable resource for homeowners in areas with moderate to high earthquake risk, including coastal British Columbia and the Ottawa-Montreal corridor.
What does earthquake insurance cover?
Earthquake insurance covers damage to your property caused by an earthquake.
We might think about an “earthquake” as the sudden violent shaking of the ground, but insurance companies often use a broader definition that includes landslides and volcanic eruptions. Take the following example from a Desjardins sample home insurance earthquake endorsement:
“Earthquake means any seismic event, whether natural or man-made, that causes ground movement. Ground movement includes avalanche, subsidence, landslide, volcanic eruption or any other ground movement directly resulting from a seismic event.”
Earthquake damage covered by your endorsement may fall into one of two categories: direct and indirect damage.
- Direct damage: Structural damage to your main dwelling caused by a seismic event (e.g., broken windows or roof collapse)
- Indirect damage: Damaged caused by fire, explosion, or smoke following a seismic event
You may have the option to add an endorsement covering both direct and indirect earthquake damage, or your insurance company may only offer an endorsement for fire, smoke, or explosion following an earthquake. Options vary by insurer and location, so be sure to ask for details.
In most cases, an earthquake endorsement means your insurance company will pay for the following after damage caused by an earthquake:
- Repairs for property damage caused by an earthquake
- Repair or replacement to personal property, sometimes with a reduced coverage limit
- Debris removal associated with repairs
- Loss of use/additional living expenses if your home is uninhabitable due to an earthquake
Earthquake coverage is always subject to a deductible, which is typically separate from your standard policy deductible. Earthquake deductibles can be very high and cover a wide range, so be sure to check this detail when buying coverage.
When considering an earthquake endorsement, check your policy language for the following:
- How does the insurer define “earthquake”? What other seismic events does this coverage apply to?
- Does the endorsement cover direct damage to your home’s structure, or only damage caused by fire, smoke, or explosion?
- What costs (like repair bills, debris removal, personal property, and/or loss of use) does the endorsement cover?
- Do you have the option to customize your earthquake coverage?
- What earthquake deductibles are available?
What is not covered by earthquake insurance?
Earthquake insurance typically comes with some major exclusions, most importantly:
- Tsunamis, tidal waves, and flooding are generally not covered
- Damage caused by your failure to take reasonable precautions to fortify your home against an earthquake
- Damage caused by an earthquake that occurred before you added the endorsement to your policy
Again, it’s important to check your policy language to fully understand all exclusions, since the details vary from insurer to insurer.
How earthquake insurance deductibles work
Earthquake deductibles are usually very high. They’re written as a percentage of your total dwelling coverage, and could range from 5% to 20% of your home’s total replacement cost.
Suppose your home is insured for $600,000, and your insurer offers earthquake deductibles of 5%, 10%, and 20%. You select a 10% deductible as a happy medium to keep your costs manageable.
In the event of an earthquake, any damage under $60,000 will be your responsibility to pay out of pocket; you won’t be able to file an insurance claim since the total amount is under your deductible.
In the event of a major earthquake that causes significant damage, you would pay your full earthquake deductible—$60,000—while your insurance company pays the remainder of your costs, up to $540,000 if your home is considered a write-off for insurance purposes.
Note: Your earthquake deductible may not apply to additional living expenses coverage if you’re unable to live in your home following the earthquake.
Do you need earthquake insurance in Canada?
Earthquake insurance is not required by law in Canada and is not included in standard home insurance policies. You can only add this insurance to your policy as additional coverage.
But do you need to add an earthquake endorsement?
It depends largely on where you live. Some parts of Canada, such as Manitoba and Saskatchewan, are subject to very low risk of seismic activity, making an earthquake endorsement less necessary. On the other hand, homeowners in earthquake hotspots like Vancouver Island may view earthquake insurance as a necessity—and your lender may require you to add this endorsement if you’re getting a mortgage for a home in a high-risk area.
Natural Resources Canada’s simplified seismic hazard maps give a birds’-eye view of earthquake risk across the country, from low to high hazard levels.
RiskProfiler, a website developed by Natural Resources Canada, uses data visualization tools to help you understand the earthquake risk associated with your address.
You can explore earthquake scenarios that show the potential damage that could be caused by certain earthquakes that scientists predict may happen in the next 50 years. For example, the model predicts that in the event of 7.5 magnitude earthquake near Val-des-Bois, Quebec (similar to a seismic event in 2010):
- As many as 35 million buildings across Ontario and Quebec could be damaged
- As many as 11 thousand buildings in Ottawa could experience “complete” damage
- Economic losses could exceed $75 billion CAD
The model also explores probabilistic risk of damage over the next 50 years. Using this map, you can explore the level of statistical risk facing your community.
How many people in Canada have earthquake insurance?
Earthquake insurance is available across Canada, but many homeowners choose not to carry it. According to the Insurance Bureau of Canada (IBC), only 4–7% of Quebec residents have earthquake insurance on their home insurance policy. Even in British Columbia, where earthquake risk is highest, as many as 50% of homeowners don’t carry earthquake coverage.
How much does earthquake insurance cost?
Earthquake insurance premiums vary significantly across Canada based on the level of earthquake risk associated with your property.
In low-risk areas (e.g., Toronto, Newfoundland, and most of the Prairie provinces), an earthquake endorsement may add as little as $15–$50 per year to your overall home insurance costs.
In high-risk areas, however—including cities like Vancouver, Ottawa, and Montreal—costs may be considerably higher. Some insurance providers charge $200–$500 per year for earthquake property insurance in high-risk zones. You may even be denied earthquake coverage if the insurer feels the risk in your location is too high.
Earthquake insurance premiums also vary based on the deductible you select when you buy the endorsement. High deductibles keep earthquake insurance affordable, but they also raise the threshold to make a claim.
When looking at earthquake insurance prices, keep in mind that this coverage is largely designed to reduce the economic burden of a significant earthquake that destroys or mostly destroys your home. It’s not meant to offer small to medium payouts if an earthquake shatters a few windows in your home; it’s there to make the difference between total financial ruin and a navigable path to recovery if your foundation cracks, your roof caves in, and a post-quake fire engulfs your property.
Is earthquake insurance worth it?
If you’re on the fence about buying earthquake insurance, speaking to a broker with knowledge of your area is the best way to determine whether this product is right for you.
For many Canadians living in high-risk zones, earthquake insurance is a necessary budget burden. While it can be expensive, it could also keep you and your family out of devastating debt if “the big one” hits.
But what if you’re located in an area with only moderate earthquake risk, such as southern Quebec or Ontario? Here, the decision becomes a matter of statistical probabilities and personal appetite for risk. A licensed insurance advisor can help you walk through the pros and cons of adding earthquake insurance to your policy.
When you get home insurance quotes with PolicyMe, you’ll have access to a licensed insurance advisor to go over all your coverage options. Your advisor can answer any questions you have about earthquake insurance and help you determine whether it’s a necessary expense or just a “nice to have” for homeowners in your area.
FAQ: Earthquake insurance
This article is for general information only and is not insurance or legal advice. Examples and any sample quotes or rate ranges are illustrative and do not constitute an offer or guarantee of coverage, price, or eligibility. Actual coverage, discounts, and premiums depend on your individual circumstances and the insurer provider; if there is any discrepancy, your policy and insurer documentation govern. For advice about your situation, speak with one of our licensed insurance professionals.