What Is the Deductible for California Earthquake Insurance?

California’s seismic activity makes earthquake insurance important for homeowners. While standard homeowners insurance policies typically exclude earthquake damage, specialized earthquake insurance provides financial protection. Understanding the deductible is key, as it directly influences out-of-pocket costs after a covered earthquake.

Understanding California Earthquake Insurance Deductibles

A deductible is the amount a policyholder pays toward a covered loss before insurance coverage begins. Unlike many other insurance types with fixed dollar deductibles, California earthquake insurance uses a percentage-based structure. This percentage applies to the dwelling coverage, contents coverage, or both, depending on the policy. Percentage deductibles typically range from 5% to 25% of the covered amount.

The California Earthquake Authority (CEA) is the primary provider of residential earthquake insurance in the state, and their policies use this percentage-based deductible model. Certain properties may have specific deductible requirements. For instance, homes valued over $1 million or those built before 1980 with a raised or non-slab foundation that have not undergone verified seismic retrofitting may only be eligible for higher deductibles, often starting at 15%. This approach ensures the deductible scales with the property’s insured value.

Calculating Your Deductible

Determining the dollar amount of your earthquake insurance deductible involves a straightforward calculation based on your chosen coverage limits and the selected percentage. The deductible is calculated as a percentage of the insured value of your dwelling or personal property, not as a percentage of the actual loss sustained. For example, if a home is insured for dwelling coverage of $500,000 and the policy has a 15% deductible, the deductible amount would be $75,000 ($500,000 multiplied by 0.15).

Similarly, if personal property is covered for $50,000 with a separate 10% deductible, the deductible for contents would be $5,000 ($50,000 multiplied by 0.10). A higher percentage deductible typically results in lower annual premiums but a greater financial burden if a claim is filed. Conversely, a lower percentage deductible leads to higher premiums but a reduced out-of-pocket cost during a claim.

Deductible Application in a Claim

When an earthquake claim is approved, the deductible is subtracted from the total covered loss before reimbursement. For instance, if a home sustains $80,000 in covered earthquake damage and the dwelling deductible is $25,000, the insurance payout would be $55,000 ($80,000 less $25,000). This applies to each separate earthquake event. Some policies, particularly those offered by the CEA under their Homeowners Choice option, allow for separate deductibles for dwelling and personal property coverage.

If the dwelling deductible is met due to structural damage, the personal property deductible may be waived. However, if the dwelling damage does not meet its deductible, but there is significant personal property damage, the separate personal property deductible can still be applied for a payout for damaged belongings. Additionally, CEA homeowners policies typically include coverage for the first $1,500 of emergency repairs without requiring a deductible to be met.