Earthquake Insurance

Archived Q&A and Reviews

Should I get earthquake insurance?

Sept 2013

I am having a hard time figuring out whether to get earthquake insurance, and if so, from where. The most recent related topics in the archives are from 2007. First, should we get earthquake insurance? I know the risk of an earthquake is very high, but so are the premiums and deductibles! We have had our house bolted to the foundation, reinforced etc. I am inclined to get it because I am a risk-adverse person, but I would like to understand the value proposition better. Second, if we get earthquake insurance, should we just get it from our the company that provides our basic homeowner insurance (State Farm) or does it make sense to shop around? Many thanks. worried in Berkeley

I did a great deal of research on earthquake insurance when we bought our home six years ago, and we opted not to purchase a policy. The major reason we made that decision is that all earthquake insurance in California is issued through and backed by the California Earthquake Authority--which is explicitly *not* backed by the state. That means that the limits of what the CEA can pay out are its own resources--and when those are exhausted, they will not be able to pay out anything further. So you can stand to benefit a lot if there is a small quake and your home is one of the few damaged, so there are few policies to pay out. But if ''The Big One'' hits- -and that was really our concern in looking at earthquake insurance in the first place--there will be thousands and thousands of claims, and based on the numbers at the time, I felt that the CEA would not have funds to cover so many catastrophic losses. Because our home is a single- story house on bedrock and not in a liquefaction zone, we decided the best use of that money was to retrofit it--bolt the foundation, add cripple walls, secure water heater, etc.--so that we would be unlikely to suffer much damage in the small quake scenario. If the big quake comes and is severe enough to cause major damage to our home, it's highly likely that it would also cause severe damage/total losses to the many insured homes that are far more vulnerable (not retrofitted, on hillsides, closer to fault zones, not on bedrock, etc.) and we would be unlikely to see much of our policy paid out. If we owned a higher risk home that was cost prohibitive to retrofit, we would probably have opted to go the insurance route, though. Some of the other concerns we had at the time were the very low limits for personal property and loss of use, but some of that may have changed since we got our quotes now that more insurers offer policies. (And the math on the CEA's finances may also have changed if they have increased the number of policies issued, too.) Happy to be bolted down!

Greetings! As a fellow risk-averse person, I do have earthquake insurance on our home in Berkeley. My understanding is that all earthquake insurance in California comes from the same source: CEA - California Earthquake Authority, although you may have yours administered through your regular insurance agent such as State Farm. (I don't think there's any markup so it probably doesn't matter who you buy it through, but I could be wrong about this).

Every year when I write that BIG check I wonder if I'm doing the right thing. The insurance is expensive and has a huge deductible. We pay something like $2500/year for our $600k home with a $60k deductible.

A hayward fault earthquake is likely - and getting more likely in each year. Here's a graphic showing the probabilities:

However, not all homes will be severely damaged, even in a large earthquake. I believe the estimate for a 7.0 hayward fault earthquake is that around 10% of homes in Alameda county will be severely damaged.

Many people think that those insurance premium dollars would be better spent on earthquake upgrades to the home - for example, in addition to foundation bolting and cripple wall bracing, you could have your chimney removed, improve the bracing of non-structural elements like shelves and TVs, and prepare your emergency supplies. It would be pretty amazing to spend $2k each year on those sorts of improvements.

A lot of people also question whether CEA will even pay out. The fund will only pay out to the extent that it has enough cash to do so. You have to wonder, in a large bay area earthquake, whether that fund will empty pretty quickly. Lastly, in the event of a catastrophic earthquake, many people may choose to leave the bay area and not come back. The economy will be disrupted for a long time. Home prices are likely to drop for a while. You might consider how this factors into your decision.

The reason I chose to have the insurance despite these concerns is that I thought about the reality of our lives if our home was destroyed by an earthquake or ensuing fire. We have an unusual, personal loan covering our mortgage which would make it awkward to go into foreclosure. And our equity is currently larger than the deductible. If those weren't the case, I don't think I'd have done it. Good luck, - earthquake believer

Earthquake insurance is provided by one agency -- the California Earthquake Authority. You can buy it through your other company, but the rates should be the same anywhere because this agency provides the coverage and determines the premiums, deductibles, etc. Unfortunately, no matter how well you retrofit, your rates won't change (this seems very unfair to me).

One thing to be aware of is that even if you have taken retrofitting measures, you still may not be doing all the recommended safeguards. One study found that 85% of homes that had retrofitted following the advice of a contractor did not have proper measures installed. This was true for us when we hired Dave Ford to come take a look. I highly recommend having him come to your home. He seems very trustworthy and does very good work. He is extremely well-informed, much more so than the vast majority of contractors. He recommended we get an engineer, which was actually a money-saver and put our minds at ease. I would use my money first on doing this, before buying the insurance. Now I am confident that our house won't fall down.

However, I have debated the question a lot about whether to pay for this insurance or not. Despite having really good retrofitting done a la Dave Ford and his recommended engineer, we still are paying for it. Our house is our biggest asset, and we just want that reassurance that if the house really suffered in a quake, our investment would not collapse. But it is a tough decision... Follow Your Gut

There is only one place to get earthquake insurance: the CEA. They work with home insurers, so you can set up your policy with whatever company you use for your homeowner's insurance, but it's my understanding that the price is the same no matter who you work through.

Whether it makes sense to get the insurance depends on your individual circumstances. The higher the seismic hazard for your house, the greater the chances that damage to your house might exceed that 15% deductible. Depending on where you live (are you in a fault zone, a slide zone, or a liquefaction zone?) and the type of construction (e.g. a soft story building), you may be at greater risk for serious damage. Or you might wind up with some broken windows and a chimney damage, which wouldn't come close to meeting the deductible. I have insurance because my house is in the fault zone (less than 1/4 mile from the Hayward Fault) AND in the slide zone, and it has the original 1920s foundation. In previous houses, I just did standard bolting and shearwalling. Shaky

Same here -- everything bolted and as earthquake ready as possible and yet we also have earthquake insurance. We have ours through our regular home owners -- State Farm. It has been a while since I shopped around, but State Farm prices made sense when I compared them all. I think they use the state program and we were worried that they would run out of money if a big one hit but we were assured that not too many people have insurance now and they have more than enough to cover. It is extremely pricey and every year we think about canceling it. The deductible is high and we keep wondering what could possibly happen that would make the deductible make sense. Our house has been added on to over the years (past owners)and it may or may not be tied together well -- who knows. We never do come up with a good answer, so we keep renewing it. Oh -- and it doesn't cover our detached car port -- if that gets damaged... we are on our own. Most of our friends and neighbors have just bolted and re-enforced and go without the insurance.

I think if you can afford earthquake insurance - and can get it - you should have it. I have a State Farm policy, pay about $700 per year. here's how I look at it: yes there is a deductible: I think it is 25K . However, this is my HOME. I LIVE here. If my house is destroyed in a quake I will want to be here, so to me it is worth it, but again, I can afford it. it's not stressing my savings plans. What is important to note is however that if we have another substantial quake, you probably will NOT be able to get earthquake insurance, that is just how the industry works. earthquake policy homeowner

2004 - 2007 Recommendations

Non CEA earthquake insurance?

March 2007

While earthquake insurance through the state has come down a tad recently, I have also heard that several companies offer private earthquake insurance that offer lower rates and more coverage options. Anyone done the research and have experience with other companies? Thanks. Bryan

We have our earthquake insurance as part of our homeowner policy with Amica. I chose them because the earthquake portion of the insurance was MUCH cheaper. earthquake insured.

I have earthquake insurance with Geovera in Walnut Creek. The rates are way more reasonable than CEA. Linda F

Is earthquake insurance necessary? it is very expensive

Sept 2005

We just received an offer of a California Earthquake Authority policy. It states that our current homeowners insurance does not provide coverage in the event of an earthquake. Is earthquake insurance necessary? I only ask because the policy is very expensive and the deductible is high. If earthquake insurance is necessary, could someone recommend who we should go through (someone reputable). Thanks in advance. Joy

I don't have earthquake insurance primarily because of the cost. Instead, when I bought my house, I made sure the house was bolted to the foundation, the water heater strapped down, etc. I feel that hiring someone to secure various items so that they don't fall is a better use of my money than spending it on earthquake insurance. Lori

From my understanding of things, yes, earthquake insurance is essential IF you want to have your house covered in an earthquake. That means that you are paying to have your HOME, not the land your home is on (an important distinction in the case of a catastrophic earthquake where the land itself loses value because of toxins etc..- think New Orleans)replaced or rebuilt after it is damaged or destroyed in an earthquake. My husband is an insurance agent for AAA, which does offer earthquake insurance. If you'd like to speak to him to get a qoute or to understand the details better his name is David Kremer. Good Luck Gabriela

This is a hard question, with no single right answer. The insurance is very expensive, and, as you point out, the deductible is significant. In addition, your coverage may be limited if lots of insured households have claims at the same time (don't most earthquakes affect a large area at once...?) So, many people feel it is a wiser investment to spend several years worth of premiums on retrofitting your home as thouroughly as possible, making it less likely that it will be damaged beyond repair when the big one actually comes. That would be much cheaper than ongoing premiums plus the deductible. Our family decided that in our own circumstance, we have family tht would be able to help us out both financially, and with temporary living space, so decided to go the retrofit route. If you would absolutely need financial help to rebuild, and can spend the annual premiums forever, then the insurance might be a good choice for you (but consider retrofitting anyway, for your and your neighbors' safety).

In additon, be sure to secure tall heavy furniture, mirrors, etc., and other ''non-structural'' hazards that may cause damage and injury (and wouldn't be covered by EQ insurance). R.K.

It is true that standard homeowners' insurance policies do NOT cover you in the event of earthquake damage. (Read the list of ''exclusions'' in your policy.) Therefore, if you want some insurance money to help replace your broken possessions and rebuild your collapsed house after an earthquake, then yes, a separate earthquake insurance policy is necessary. (Of course, you may decide that the price is too high to be worth it, and to just take the risk that your property won't be too badly damaged in a quake. How close is your home to a fault line? Is your neighborhood on landfill?)

Few if any insurance carriers offer anything but CEA policies for earthquake coverage and those are pretty standardized. There is a high deductible, but given the price of Bay Area real estate I think the policy is still worth having. I don't know how much pricing varies. Start by calling the carrier that has your general homeowners' policy and ask what they offer. (Ours is through USAA, which is only available to current or former members of the military and their children.) Bought the Coverage

Nobody knows for sure what will happen if and when the next big earthquake causes widespread damage affecting tens or hundreds of thousands of homes in the Bay Area.

Many people, such as myself, have made the calculation that earthquake insurance is too expensive, covers too little, and is not necessarily going to pay out should there be a massive loss. That is, the insurer may go insolvent, and it is not backed up by the federal government (as I believe flood insurance is). (Don't forget how expensive and difficult it will be to get contractors and building materials in the immediate aftermath of a quake when everybody else is doing the exact same thing.) In my opinion, a far better investment of your $1000-plus annual premium would be to improve the safety of your home's structure, particularly replacing or improving the foundation and adding shear walls. Oakland and Berkeley offer a one-time credit toward your transfer tax that can make retrofitting more financially appealing. Another good investment would be some survival supplies like bottled water, canned food, camping stoves and extra fuel to help you get by for a few days.

On the other hand, if you are sure you would need an insurance settlement (as opposed to, say, savings) to rebuild your home after it is destroyed by an earthquake, earthquake insurance is really your only option. David

Earthquake insurance is only necessary if there is an earthquake. Most people can't seem to get their heads wrapped around the actual risk of an earthquake (apparently there is a 66% chance of a major earthquake on the Hayward fault in the next 30 years), and given the huge expense, people figure that they can do without it. Only 15% of California homeowners have earthquake insurance. (All stats have been culled from recent news articles relating the Katrina aftermath to our local earthquake risk, and are from memory).

I have earthquake insurance. It costs about a third more than my basic homeowners insurance. In other words, adding earthquake protection increased the cost of my total homeowners insurance by 250%. Why do I pay for it? When I bought the house, the foundation was crumbling to the point where there was no way to bolt the house to the foundation. I was afraid even a minor quake would destroy the house, leaving me with a giant mortgage and nothing to show for it. Now that I have a foundation and all the proper earthquake retrofits I still keep the insurance. Why? because the risk of a quake is so high.

Regarding purchasing earthquake insurance, this is from the California Earthquake Authority website (
''In order to purchase a CEA earthquake insurance policy, your homeowner insurance must be issued by one of the CEA Member Insurance Companies listed below. Click on any of the company names listed below for additional contact information. Allstate Insurance Company Armed Forces Insurance Exchange California FAIR Plan CSAA Encompass Insurance (formerly CNA) Farmers Insurance Group Homesite Insurance of California Interinsurance Exchange of the Automobile Club Liberty Mutual Merastar Mercury Prudential State Farm Insurance USAA Workmen's Auto Insurance''

2003 & Earlier

Earthquake Insurance - To have or not to have?

Feb. 2003

Earthquake Insurance - To have or not to have? Our 100 year old (+/-) brown shingle home is located in the Elmwood District off College Avenue in Berkeley. We have redone the foundation, bolted, shearwalled, etc. We have had EQ insurance since our purchase over a decade ago. As it was a fixer upper, we bought well below the market value. Given this and the increase in values in this area, we have happily seen our house value increase over the years, which means we have a lot of equity in our home. This has been the argument for paying for costly EQ insurance - that we have more to loose than the mortgage company should there be a devastating earthquake. Is this sound logic? What, beyond worry or adversity to risk, is the criteria for having an EQ policy? A few years ago the policy doubled! and the company seemed to offer less coverage. Our broker has given us the impression that if we cancel this policy we won't get another due to the age of our home. Is this true? It is getting harder to justify the expense, but then we don't want to loose on our investment. Advice greatly appreciated.

You have already done the most important thing, which is to have an experienced contractor bolt your foundations and put in shearwall etc. Additional insurance IS very expensive so you need to do a cost benefit analysis. What benefit would you get given your risk? My sense is very little. But here are two options: Go to the abag website and you will see what the earthquake risk is in your area for different fault lines. The website is: .

Second, IF you decide to get insurance, consider that you are insuring against complete loss; that means if the damage is only partial, probably the cost of the insurance will outweigh the risk. SO you could get a deductible of 200-300 thousand. This will bring down your premium tremendously and insure you for what you really need which is catastrophic loss. peter

Older reviews: Companies that offer earthquake insurance

Dec 1998

Our agent is Alan Quan with Allstate. Last year we price shopped for insurance after being with Farmers for almost 7 years. Allstate had the best prices for our needs and I liked Alan's attentiveness in getting the policy written, coming to our house quickly, returning phone calls promptly, etc. His phone number is 510-581-8213.

Be prepared for sticker shock on earthquake. All earthquake insurance is provided by the State of California but you purchase it via whatever your insurance company you end up going with. The deductibles are outrageous and so are the rates. Our CEA (California Earthquake Authority) policy is actually $700 per year more than our homeowners policy. The CEA recently lowered the rates due to pressure from politicians but it only lowered our bill by a couple of hundred dollars.

We debated about whether to carry the coverage or not. Our decision came down to whether we could financially recover if we lost 100% of the equity in our house due to a catastrophic earthquake. We decided we couldn't and forked over the money.

I get upset on this topic because we had earthquake coverage through Farmers prior to the CEA and it was extremely affordable. The catch 22 back then was that you couldn't shop around for homeowners rates because insurers wouldn't accept new policies. Once the CEA took over the earthquake liability insurers agreed to write new policies in California. I've also read a lot of debate about whether the CEA would have enough money to cover losses in a catastrophic earthquake. It's also questionable how an entire area could recover from a major quake given most people have been priced out of the CEA's rates and therefore are not carrying the insurance.

From: Susan (5/98)

I know that Amica, a highly regarded and highly rated out-of-state insurance company, offers their own earthquake insurance, which I believe provides much better coverage than offered through the CEA. However, I also know that they are very restrictive and for many years were not accepting new policy holders in CA. A friend recently told me that they currently writing new policies in CA but only for houses built fairly recently. Their # is 800-242-6422.