Is Earthquake Insurance Worth It in San Francisco?

San Francisco, situated in one of the world’s most seismically active regions, faces a persistent risk of earthquakes. The city lies near major fault lines, including the San Andreas and Hayward Faults, making seismic events a regular concern for its residents. While homeowners often rely on their insurance for protection, standard homeowner’s insurance policies typically do not cover damage caused by earthquakes. This means homeowners are responsible for repair or rebuilding costs unless they have a separate earthquake insurance policy.

Key Coverages and Exclusions

Earthquake insurance is a specialized policy designed to cover losses directly resulting from seismic activity. This coverage typically includes dwelling coverage for structural repair or rebuilding of the home and attached components, such as a garage.

It also provides personal property coverage for belongings damaged inside the home, including furniture, electronics, and clothing. Loss of Use coverage, also referred to as Additional Living Expenses (ALE), covers temporary housing and increased living costs if the home becomes uninhabitable after an earthquake, such as hotel stays, rental homes, and restaurant meals.

Deductibles for earthquake insurance operate differently than standard homeowner’s policies; they are typically calculated as a percentage of the coverage limit, rather than a fixed dollar amount. These percentages commonly range from 5% to 25% of the dwelling coverage, which can result in substantial out-of-pocket costs before the insurance begins to pay. For example, a home insured for $500,000 with a 15% deductible would require the homeowner to pay the first $75,000 of covered damages. Some policies may have separate deductibles for dwelling and personal property.

Common exclusions include fire damage (typically covered by standard homeowner’s policies), vehicle damage (covered by comprehensive auto insurance), and land damage (such as liquefaction or landslides). Pre-existing damage to the property is also excluded.

Determining Your Earthquake Insurance Premium

The cost of earthquake insurance is influenced by several factors. Property location, particularly its proximity to active fault lines like the San Andreas and Hayward Faults, and presence in liquefaction zones or areas with certain soil types, typically incur higher premiums due to increased risk.

Home characteristics also play a role in premium calculation. The age of the home is a factor, with older structures often facing higher rates as they may be more susceptible to damage. Construction type, such as wood-frame versus unreinforced masonry, impacts the premium, with wood-frame homes generally faring better. Seismic retrofitting to strengthen a home’s foundation can lead to discounts, as these improvements reduce the risk of severe damage.

Coverage limits and deductibles directly affect the premium. Higher limits result in higher premiums. Conversely, opting for a higher deductible can reduce the annual premium, requiring a balance between upfront cost and potential out-of-pocket expenses.

The California Earthquake Authority (CEA) is a significant provider of earthquake insurance. The CEA is a publicly managed, privately funded, not-for-profit organization that offers policies through participating insurance companies. While the CEA sets rates based on scientific risk assessment, some private insurers also offer earthquake policies, providing additional options for coverage.

Financial Realities Without Coverage

Without earthquake insurance, homeowners in San Francisco face significant financial exposure. All costs for repairing structural damage, replacing personal property, and securing temporary housing fall entirely on the homeowner.

While federal disaster aid may be available, it is typically low-interest loans, not grants. These loans often do not cover the full cost of rebuilding or extensive losses. Homeowners still bear primary financial responsibility, and relying solely on government assistance can leave a substantial financial gap.

Uninsured earthquake damage can diminish a home’s equity and market value, making it difficult to sell or refinance. Mortgage obligations continue even if the home is destroyed or uninhabitable. Homeowners remain responsible for ongoing mortgage payments while funding repairs or alternative living arrangements.

Steps to Secure Earthquake Insurance

To obtain earthquake insurance, contact your current homeowner’s insurance provider. Most California insurers are required to offer earthquake insurance, often through the California Earthquake Authority (CEA), or can direct you to other providers.

Get quotes from multiple providers, including the CEA and private insurers, to compare coverage options and premiums. The CEA offers a premium calculator to estimate costs.

When seeking quotes, provide property information such as address, build year, construction type (e.g., wood frame, masonry), foundation type, and desired coverage limits and deductible preferences. This helps insurers assess risk and calculate the premium.

Once a policy is selected, review the policy documents. Understand the deductible amount, coverage limits for dwelling, personal property, and additional living expenses, and any exclusions. Some insurers may also offer discounts for seismic retrofits.