Earthquake Insurance: to Buy or Not to Buy?

By George Stephens, IAC Member

After the 6.7 Northridge earthquake in 1997, California mandated that insurance companies selling homeowner’s insurance policies also offer earthquake insurance. Many people mistakenly think their homeowner’s insurance policy covers them in the event of an earthquake. It doesn’t. Everything you thought you knew has changed!

In order to be covered for earthquake damage you must specifically carry earthquake insurance with the California Earthquake Authority (CEA) through your homeowner’s policy.

Be aware that even though earthquake insurance must be offered, homeowners are not required to purchase it. It is optional. If you choose to opt out of purchasing earthquake insurance that means you are assuming the entire financial risk if a quake occurs.

Southern California earthquake scientists predict a high probability of a 7.8+ quake along the ‘Great Bend’ of the San Andreas Fault. The San Andreas Fault is a seismic fault line cutting through the state of California, forming the boundary between the North American and Pacific tectonic plates. SCSH is located very near the San Andreas Fault at the east end of the “Great Bend”.

Earthquake insurance, like all insurance, comes with different coverage and deductible options. Insurance policy premiums are dependent upon the options selected such as the dwelling coverage limit, the percentage of deductibles, personal property coverage, loss of use, etc.

In 1985, the California Earthquake Authority (CEA) and the California legislature came up with a no-frills “mini policy” that any insurer could sell to comply with the mandatory offer law. The CEA offers insurance from approximately 30 different insurance companies. The premiums offered are mandated by the CEA. This means premiums are identical regardless of the company you choose. They range from $2,862 a year for full coverage to the minimum of $618.00 for the no-frills policy with a $100,000 deductible. The CEA also offers coverage for renters.

An informal survey of 22 Shadow Hills residents found that only two had earthquake insurance. One resident, who has the insurance, lived through the 1996 Northridge earthquake. Her home was 6 miles away from the epicenter and suffered extensive damage. Fortunately, she had earthquake insurance and was able to rebuild. Many of those who didn’t have earthquake insurance walked away from their homes.

Many residents surveyed expressed the belief that any earthquake event would result in damage below the $100,000 deductible (the highest deductible), so repairs would be covered out of pocket regardless of coverage. While it is possible damage could be within the deductible amount, this is a decision that should be carefully considered.

We all have made significant investments in our homes. Informed insurance coverage evaluation is highly recommended.

*For more information on CEA’s Earthquake coverage, visit