What Percentage of Californians Have Earthquake Insurance?

Earthquake activity is a constant consideration for residents across California, a region known for its numerous fault lines. Standard homeowner insurance policies often do not cover earthquake damage. Securing separate earthquake insurance provides financial protection, offering a means to rebuild and recover after a significant seismic event.

Current Landscape of Earthquake Insurance in California

Despite California’s high seismic risk, only about 10% to 14% of its residents carry earthquake insurance. This reflects a notable gap in financial protection for many property owners. The California Earthquake Authority (CEA), a publicly managed, not-for-profit organization, provides the majority of residential earthquake policies within the state. The CEA issues approximately two-thirds of these policies. The adoption rate for this specialized coverage remains low, meaning many residents could face substantial out-of-pocket costs for repairs following a damaging earthquake.

Factors Shaping Earthquake Insurance Adoption

The low adoption rate of earthquake insurance in California is influenced by several factors, including premium costs and deductible structures. Annual premiums range from $850 to $2,500, depending on property characteristics and location. Deductibles are typically calculated as a percentage of dwelling coverage, often 5% to 25%. For example, a 15% deductible on a $500,000 home results in a $75,000 out-of-pocket expense before coverage begins.

Public perception of risk also plays a part, with some believing a major earthquake “won’t happen to me.” Many residents are unaware that standard homeowners insurance policies exclude earthquake damage, leaving a significant protection gap. Homes valued over $1 million or built before 1980 without verified seismic retrofitting may face higher minimum deductibles, often 15%. However, seismic retrofitting can reduce premiums, with some insurers, including the CEA, offering discounts of up to 25% for reinforced homes.

Core Components of Earthquake Insurance Coverage

Earthquake insurance in California provides coverage for specific types of damage from seismic activity. The primary component is dwelling coverage, which helps pay for the repair or rebuilding of the home’s structure and attached structures, such as a garage. The limit for dwelling coverage is often set at the same amount as the dwelling limit on a standard homeowners insurance policy. Many policies also include personal property coverage for replacing belongings inside the home, such as furniture and electronics, though this coverage may have its own deductible.

Coverage for additional living expenses, sometimes called “loss of use” coverage, is also included. This assists with costs like temporary housing and meals if the home becomes uninhabitable due to earthquake damage. Earthquake insurance policies also contain specific exclusions. Damage from fire, even if caused by an earthquake, is typically covered by a standard homeowners insurance policy, not earthquake insurance.

Exclusions include damage to the land itself, such as sinkholes or erosion, and damage to vehicles, which comprehensive auto insurance covers. Pre-existing damage to the property is also not covered. Water damage from external sources like floods or tsunamis, even if triggered by an earthquake, requires a separate flood insurance policy.

Obtaining Earthquake Insurance in California

Obtaining earthquake insurance in California is linked to existing residential property coverage. If a homeowner has a standard homeowners insurance policy, their insurer is legally required to offer earthquake insurance every other year. This written offer details coverage limits, deductibles, and premiums, and the homeowner has 30 days to accept it.

The California Earthquake Authority (CEA) is a primary provider, but does not sell policies directly to consumers. CEA policies are purchased through participating residential insurance companies. To obtain a CEA policy, an individual must have their residential property insurance with one of these participating insurers and purchase the earthquake policy from the same company. Prospective policyholders can use the CEA’s online premium calculator to estimate costs before contacting their agent.