Earthquake Insurance in Switzerland: Necessary or Not?

Swiss real estate is expensive, so it makes sense that homeowners would want to protect their investments against any and all possible hazards. But earthquakes are not a primary concern for most homeowners, and many may not even consider whether or not to insure their homes against earthquakes until they receive an insurance offer.

Switzerland: On the fault line

Switzerland is not known as an earthquake hotspot, with the last notable earthquake having hit the town of Sierre (Valais) in 1946. The vast majority of earthquakes which occur in Switzerland are so minor that they go unnoticed by all but seismologists. However, the country’s location on the fault line of the African and European continental shelves means the risk of earthquakes is higher in Switzerland than it is in many other European countries – albeit far lower than in high-risk regions like Italy and Greece.

The majority of measurable seismic activity occurs in the canton of Valais, as can be noted by the abundance of natural thermal springs in the region. Other hotspots include the Engadin region in the canton of Grisons, and Basel – which experienced a series of devastating earthquakes in the 1356 A.D. However, seismic activity is present in most parts of the country.

Obligatory buildings insurance: The multi-cantonal earthquake pool

Taking out buildings insurance from a designated cantonal buildings insurance provider is compulsory in 19 cantons (all but Appenzell Innerrhoden, Geneva, Obwalden, Schwyz, Ticino, Uri, and Valais). 17 of these compulsory cantonal buildings insurance providers participate in a joint Swiss pool for earthquake insurance (SPE). The compulsory buildings insurance provider in the canton of Zurich operates its own earthquake insurance pool. The compulsory buildings insurance provider in the canton of Bern does not participate in the joint earthquake insurance pool and does not maintain its own earthquake insurance pool.

The joint Swiss pool for earthquake insurance compensates homeowners in the covered cantons in the event that their homes are damaged by major earthquakes. Only damages caused by earthquakes measuring 7 or more on the EMS-98 scale are covered. Scale 7 denotes earthquakes which cause significant damage to buildings, and older buildings in particular. The pool pays out compensation up to a maximum of 2 billion Swiss francs per earthquake (or series of earthquakes occurring within a short timeframe). It covers up to 2 earthquakes per calendar year. The deductible which you must cover out of your own pocket is equal to 10 percent of the claim. The minimum deductible is 50,000 francs, so you will always have to cover costs up to 50,000 francs yourself.

The 2-billion-franc pool is distributed between all claims resulting from the same earthquake. This means that if an earthquake only affects a relatively low number of buildings, the cost of damages may be covered in full. If the earthquake damages a large number of buildings, the pool will be distributed proportionately between affected homeowners based on damages incurred. Because property prices and restoration costs in Switzerland are relatively high and the pool covers 17 cantons, its 2 billion francs is not sufficient to cover the potential damage wrought by interregional earthquakes or earthquakes occurring in heavily-populated areas.

Zurich: The 1-billion-franc cantonal earthquake fund

The buildings insurance of the Canton of Zurich maintains its own earthquake insurance fund. This fund covers up to a maximum of 1 billion francs per earthquake measuring 7 or more on the EMS-98 scale. It covers a maximum of 2 earthquakes per calendar year. The deductible is 10 precent, but a minimum of 50,000 francs. This fund is more concentrated than the multi-cantonal Swiss pool because it covers a single canton only. However, it is important to note that the Canton of Zurich is among the most densely-populated in Switzerland, and property prices are also among the highest in the country.

Mandatory buildings insurance: No contractual right to earthquake compensation

Note that the earthquake pools of mandatory cantonal buildings insurance do not entitle you to any specific earthquake insurance benefits. It is up to your cantonal buildings insurance provider to determine whether or not you are eligible for compensation after an earthquake hits. The process of determining whether an earthquake and resulting earthquake claims are eligible can be longwinded. Additionally, this pool can only be accessed in the event of major earthquakes. Damages caused by less-severe earthquakes are not eligible for coverage. For this reason, it is best to consider compulsory buildings insurance with earthquake pool access as a possible social benefit, rather than as an insurance which delivers guaranteed benefits.

The primary advantage of the earthquake coverage which you get with some compulsory cantonal buildings insurance policies is that you do not pay an extra premium for this coverage. It is included in the standard premiums.

Private earthquake insurance in Switzerland

A number of private insurance providers offer voluntary earthquake insurance to homeowners. Typically, this insurance is offered as an optional rider which can be attached to buildings insurance. But there are also insurance providers which specialize in earthquake insurance and offer stand-alone earthquake insurance policies.

The primary advantages of private earthquake insurance is that it generally covers damages caused by all earthquakes – including minor earthquakes. Another advantage is that, depending on the policy, you may be able to select a much lower deductible than the one applicable to earthquake pools. Some earthquake insurance policies limit coverage for combined claims resulting from the same earthquake, but the majority provide unlimited coverage up to the sum insured by the policy.

In cantons which do not have compulsory buildings insurance, or have compulsory buildings insurance which does not include an earthquake pool (like the canton of Bern), getting voluntary earthquake insurance is the only way to insure your home against earthquake damages. Unlike compulsory insurance, the premiums which you pay for voluntary earthquake insurance vary broadly depending on which insurance provider you use, and the risk of earthquakes in your region.

Requesting multiple insurance quotes and comparing the premiums, terms and conditions before you buy is recommended.

Mortgages with integrated earthquake insurance

Some Swiss mortgage providers – like the Basellandschaftliche Kantonalbank (BLKB), the Obwaldner Kantonalbank, and the SBB pension fund – provide complimentary earthquake insurance with their mortgages. Typically, the insurance covers the value of the mortgage, so a fully-mortgaged property is fully covered (minus the portion covered by the down payment), but coverage declines as the mortgage is amortized. 

Do you need earthquake insurance in Switzerland?

The chance of a catastrophic earthquake occurring can never be ruled out completely. But because the majority of earthquakes occurring in Switzerland are minor, the most significant risk posed to homeowners is the risk of minor structural damage. This typically includes damage to a building’s façade. In the worst case, minor earthquakes can damage the actual structure. While minor damage may not impact the usability of a building, it can have a serious impact on the building’s value. Repairs can be very expensive. In the worst case, structural damage may be difficult or impossible to repair.

If a home is mortgaged, a sudden strong decline in the value of the building can result in the building no longer providing sufficient collateral to secure the loan. For this reason, getting earthquake insurance for the mortgaged value of your home can be a good financial move. Should an earthquake occur before your mortgage is amortized, the insurance benefit can help cover the costs of restoring your home to its former value, or provide you with a means of amortizing the portion of your mortgage which is no longer covered by the value of your home. If you fully own your home, the need for earthquake insurance is smaller because you do not risk defaulting on a loan or losing your home due to earthquake damage.

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