Pros and Cons on Cal. Earthquake Insurance

Following a major earthquake, more homes are destroyed by gas explosions and fires than by the quake itself. Fire insurance will cover that damage. You should have an automatic gas shut off valve on your home that will automatically shut off the gas in the event of a significant shaker. But if your neighbor doesn’t have one and that home catches fire, it could spread to your home. I imagine fire departments will be overwhelmed during a “Big One” so your fire insurance coverage is very important.

No earthquake insurance for us, but we live in a townhome and our association does have earthquake insurance. The Rose Canyon Fault here in San Diego is a couple of miles from us.

We just decided to get the CEA insurance, after a few months of vacillation.

Last year we took part in the Brace & Bolt program in CA to have the house bolted to the foundation, that is worth doing whether you get insurance or not. With the program you get up to $3K from CA to help pay for it (unfortunately taxable as income on your Federal return). We also installed a gas shutoff valve that is activated by an earthquake; these are required when a house is sold in LA, seemed like a good idea

We had an offer from our agent for a private insurance that was less, but decided on CEA because the CEA policy doesn’t have a deductible for loss of use.

Given they predict the Hayward fault is likely the site of the next “big one” I’d be more inclined to get earthquake insurance if I lived there. And be very nervous at Cal football games :wink:

My husband and I survived the Northridge earthquake in 1994, but we had to move out of our house for repairs. We had earthquake insurance, which helped a lot. Here are a few more things to think about when making the decision for your house:

SBA disaster loans will be available in the event of a federal disaster declaration. However, these have credit qualifying requirements. So if you have a bad FICO score, a heavy debt load, poor work history, etc. you probably won’t qualify for a loan. We were able to get a loan which covered the insurance deductible, and all the out of pocket costs that seem to add up despite having insurance. The loan was secured by a second trust deed on our house.

Your ordinary homeowners insurance will cover things like broken dishes, food loss, and temporary housing. We didn’t have any vehicle damage, but I think your vehicle policy will cover damage to cars (which will happen if the cars are in the garage).

The earthquake insurance covers the structure of the house, so the architectural integrity issues, the broken stucco, and the splintered 4X4’s in the attic are covered by earthquake insurance.

FEMA does NOT do a whole lot for you. FEMA’s purpose is to handle the immediate crisis…they want you to have a mattress, one TV for the house, one chair per person, and essentially be safe and secure for the short term. FEMA does not do anything to help you rebuild your house. We received around $2,000 from them.

Stay safe everyone.

Can you share with us your Northridge damages and cost of repair. How did the insurance helped, given 15% deductable?

The insurance was capped at $100,000, with a $10,000 deductible. We maxed out the policy. The remainder was covered with a $30,000 SBA disaster loan. The loan roughly covered the deductible plus $20,000 of other uninsured expenses. This was back in 1994, and the house was just under 1,500 SF, so its hard to know what these dollar amounts would be worth today.
The house was “green tagged” by the city, so we didn’t have to move out immediately, but there was so much work that needed to be done that it wasn’t reasonable to try to stay during the repair process. There were a lot of houses in the neighborhood that went into foreclosure because the owners had little equity, and they didn’t have the money for the repairs. The owners made the financial decision to walk away.
After reading the above posts again, it sounds like earthquake insurance options may have changed. The policy wasn’t set by the value of the house, it was just a fixed amount. In our case it was offered by our homeowner’s insurance company at $100,000.

The Northridge quake in 1994 was the event that caused insurance companies to flee the earthquake insurance market, since earthquakes are very rare events that have the potential of causing large losses at one time (as the Northridge quake did), making it difficult to assess insurance risks on them*. California law at the time required homeowners insurance companies to offer earthquake insurance, but many insurance companies stopped or threatened to stop issuing new policies or leave the state entirely because they did not want to deal with earthquake risks. The CEA was created as a result, and most homeowner insurance companies resold CEA policies.

*Note that floods are similar types of risks from an insurance standpoint, which is likely why there is government flood insurance.

DS feels earthquake insurance isnt worth it. I wish he’d get it, but so far, nope. Whats EQ vs CEA insurance?

The insurance companies definitely mis-calculated the risk. We paid the $150 annual premium twice, and then got slammed by the earthquake for a full payout. I always say that the earthquake insurance policy purchase was the best gambling risk that I ever chose to take. :smile:


CEA is the gold standard for earthquakes insurance in CA. It costs the most but because it’s government sponsored so it is told the most likely will be paid out in case of the big one hits. There are other private EQ insurances but it might not survive after the big one.


We have earthquake insurance on our house. $2000 a year premium,I’m not sure what the terms of the policy are. My H said every year he thinks about cancelling it. Our house is securely bolted to the foundation. Our lot was regraded and compacted when we built our present home. My H doesn’t think we will have a problem. We also have two large water heaters that would be useful if water lines were broke.
Prior to the Northridge quake earthquake insurance was fairly inexpensive. The business I worked for had a lot of damage to properties in LA with the Northridge quake. The insurance company paid for a lot of the repair work. Since that time the premiums have risen to a point it isn’t affordable to have coverage.
I know the city of Los Angeles and Santa Monica are requiring retrofit work on a lot of properties.
I’ve been thinking about earthquake preparation since the last quakes. I don’t think my children who all live in California have any earthquake supplies on hand. My H has tried to get them to always have a decently full tank of gas. We have learned even with the wildfires that power can go out. No power means no gas pump working and no way to get cash from the ATM.

I don’t think folks can afford NOT to have earthquake insurance in case there is major damage. You don’t want to have to consider monster loans in addition to dealing with lots of losses, IMHO. It does feel like throwing money away on premiums when I write the check, but I’m afraid not to so we we keep buying hurricane and flood insurance (hope to never make a claim).

After my parents survived the Loma Prieta earthquake of 1989, or San Francisco earthquake of 1989, we have kept the earthquake insurance ever since. The house, now I have inherited, is sitting on the San Andres Fault, less than 10 min. walking from the Crystal Spring. The house was not damaged in the quake. I am also debating whether should I cancel the insurance.
Incidentally, few years ago, I tried to hawk a piece of vacant land in San Bruno and found out that the Loma Prieta earthquake of 1989 cause a earth crack in middle of the property. In order to build on it, you have to build 40 feet each way away from the crack. That gave the last blow to a client who was interested. Today, I am still wonder if that building code does any thing to the future earthquakes, the quake will open up the ground wherever it wanted, 40 feet from an old crack does nothing to prevent the new building falling down.

My DS’s argument against earthquake insurance is that the biggest value is the land, not the cost of rebuilding. And with a big deductible anyway plus the annual cost of the premium he felt it wasn’t worth it. Not sure I agree, and no idea if his mortgage company made him buy it, but he hasn’t mentioned that.

Whether a house’s rebuild cost is large relative to the land value varies. However, earthquake insurance should be priced on rebuild cost, not property value. Whether the owner may want to buy it depends on whether s/he can afford the rebuild cost, or just the deductible, or neither, in addition to how s/he sees the risk relative to the premium cost.

we dropped our EQ insurance, for the reasons mentioned in the article. But we also have a ~1980 home wood-structure home, bolted to the foundation. The most likely damage will be from collapsing chimneys, both in rooms with cathedral ceilings.


@bluebayou Exactly the reason my H gave me.

Only 10% of Californians bought the EQ insurance. For those who did not, because the reason stated above. Who ever bought it, just for a peace of mind, it is not reality check.