Jeffrey Wade
Despite experiencing 90% of the country's earthquakes, only 10-13% of California homeowners have earthquake insurance. California has experienced 6 of the top 10 costliest earthquakes in US history, and yet earthquake insurance is not required anywhere in the state. This raises the question of why so few Californians have earthquake insurance and what can be done to increase coverage.
| Characteristics | Values |
|---|---|
| Percentage of California homeowners with earthquake insurance | 10%-13% |
| Reasons for low insurance | People don't think earthquakes will happen to them, high cost of insurance, belief that the government will provide assistance, and the perception that earthquake damage is included in standard homeowners insurance. |
| Average cost of earthquake insurance in California | $1500/year with a $30,000 deductible in coastal SoCal (Ventura) |
| Ways to lower premium | Increase deductible, retrofit home with seismic bracing and bolting, and participate in grant programs like Earthquake Brace + Bolt and Earthquake Soft-Story |
| Organizations providing information and resources | California Earthquake Authority (CEA), Federal Emergency Management Agency (FEMA), and United States Geological Survey (USGS) |
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What You'll Learn
Only 10-13% of California homeowners have earthquake insurance
Despite California experiencing 90% of all the earthquakes in the United States, only 10-13% of California homeowners have earthquake insurance. This is due to a combination of factors, including the belief that it won't happen to them, concerns about the cost, and a lack of awareness that standard homeowners insurance does not cover earthquakes.
California is particularly vulnerable to earthquakes due to its location along the West Coast plate boundaries, and it has experienced six of the top ten costliest earthquakes in US history. However, the majority of homeowners in the state are uninsured against earthquake damage.
One of the main reasons for the low uptake of earthquake insurance is a perception of low risk. Earthquakes don't happen very often, and when they do, they are not always highly destructive. People tend to think it won't happen to them and that the government will step in if needed. Additionally, earthquakes are unpredictable and can be easily forgotten as they are “out of sight, out of mind”.
Cost is another significant factor. Earthquake insurance can be expensive, with high deductibles, and some people may not see the value in paying for something they may never use. The cost of coverage may be particularly prohibitive in high-risk areas like California. People may also be unsure about what earthquake insurance covers and assume that it is included in their standard homeowners insurance policy. However, earthquake insurance is typically sold as an add-on to homeowners insurance or as a separate policy, and it is not always clear how to obtain coverage or file claims.
The lack of earthquake insurance in California has significant implications for the state and its residents. Without insurance, individuals may struggle to recover financially from earthquake damage, and the state may face challenges in funding recovery efforts. While earthquake insurance is not mandatory, it is an important tool for mitigating the financial impact of earthquakes and providing peace of mind for homeowners.
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Earthquakes are rare, so people don't think it'll happen to them
Earthquakes are rare, so many people in California don't think it'll happen to them. This is one of the main reasons why only about 10% to 13% of California homeowners have earthquake insurance, despite the state's high earthquake risk. California has experienced 6 of the top 10 costliest earthquakes in US history, yet the vast majority of residents go without earthquake coverage.
The infrequency of earthquakes makes them a "silent danger", as they occur so rarely that people don't perceive them as an imminent threat. The last major earthquake in California was over 25 years ago, and it's easy for residents to dismiss the risk and go on with their busy lives. This sense of complacency is further reinforced by the fact that earthquakes are unpredictable and don't provide any visible warning signs.
The perception of low risk contributes to the belief that earthquake insurance is unnecessary. Homeowners may rationalize that the likelihood of an earthquake damaging their specific property is minimal, especially if they live in an area that hasn't experienced a significant earthquake in a long time. This sense of security can lead to a false sense of security and a delay in purchasing insurance.
Additionally, some Californians may mistakenly believe that their standard homeowner's insurance policy includes earthquake coverage. However, earthquake damage is specifically excluded from most homeowner's policies, and separate earthquake insurance is required. This misunderstanding can leave homeowners vulnerable in the event of an earthquake.
The cost of earthquake insurance is also a significant factor in the low uptake of earthquake insurance in California. Many people perceive earthquake insurance as expensive and believe that the high deductibles and limited coverage may not provide sufficient protection. They may calculate that the cost of insurance outweighs the perceived risk of earthquake damage. However, this perception of cost versus risk can be misleading, as the financial impact of an earthquake can be devastating without adequate insurance.
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People worry about the cost of earthquake insurance
Earthquake insurance is not a requirement for homeowners in California or anywhere else in the US. However, only 13% of California homeowners have earthquake insurance, despite the state being vulnerable to earthquakes. Two-thirds of earthquake damage in the country happens in California.
The cost of earthquake insurance is a concern for many people, with some saying it is expensive and others disagreeing. The price of earthquake insurance depends on several factors, such as the location of the home, the cost to rebuild, the type of construction, the coverages selected, and the deductible. The yearly cost of earthquake insurance can range from $300 per year for those in a low-risk area to $2,000 per year for those with an older home in a high-risk area. The average cost is about $850 per year, with some people paying $1,500 with a $30,000 deductible or $290 with a 5% deductible. The higher the deductible, the more the insured must pay out of pocket if they file a claim. The deductible can range from 5% to 25% of both the dwelling coverage and personal property coverage.
The cost of earthquake insurance is typically higher for older homes, homes built of brick or masonry, homes with more than one story, and homes on sandy soil instead of clay or rock. Additionally, homes that are not up to code may be charged a higher premium and/or deductible, although retrofitting to make the home safer and stronger may result in a discount.
The high cost of earthquake insurance in high-risk zones near fault lines leads many people to decide against purchasing coverage. They may feel that the risk of an earthquake is low or that the government will provide assistance in the event of a disaster. However, earthquake insurance is important because it decreases the financial burden on individuals, businesses, and society in general after an earthquake occurs.
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Earthquake insurance is not a requirement in California
Another reason earthquake insurance is not mandatory in California is the cost. Earthquake insurance can be expensive, with high deductibles, and the coverage may not seem worth the price for some homeowners. The cost of earthquake insurance depends on various factors, including the age and structure of the home, the type of soil it is built on, and its proximity to a fault line. For older homes or those built with brick or masonry, the cost of earthquake insurance can be significantly higher. Additionally, the coverage may be limited, and it may not cover all the damages incurred during an earthquake.
While earthquake insurance is not required by law or mortgage lenders in California, it is still essential to consider the risk of earthquakes in your area. California is one of the most active seismic areas in the United States, and the entire state is vulnerable to earthquakes. Homeowners in high-risk areas, such as San Francisco and San Diego, should carefully consider their coverage needs and consult with an insurance agent to determine if earthquake insurance is necessary for them.
Furthermore, the California Earthquake Authority (CEA) does not offer standalone earthquake insurance policies. To qualify for CEA insurance, homeowners must have a residential property insurance policy with one of the participating insurance companies. However, homeowners are not required to purchase earthquake insurance through the CEA and can explore private insurers for coverage. While earthquake insurance may not be mandatory, it is an important tool for transferring the risk of earthquake damage and funding recovery efforts. It helps limit the economic impact on individuals, businesses, and the government following a disaster.
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People may not know they need separate earthquake insurance
Only about 10% to 13% of California homeowners have earthquake insurance, despite the state's vulnerability to earthquakes. This is because many people may not know that they need separate earthquake insurance. Firstly, people may not be aware that standard homeowners coverage does not include earthquake coverage. Homeowners insurance policies do not cover damage from natural disasters such as earthquakes, floods, and landslides. Earthquake insurance is typically sold as an endorsement to a homeowners policy or as a standalone policy.
Secondly, people may believe that the government will step in and provide assistance in the event of an earthquake. They may also think that their homeowner's policy covers earthquake damage, especially if they have never experienced an earthquake before. However, earthquake insurance specifically excludes certain types of problems that occur before, during, or after an earthquake, such as fire, water damage, and earth movement from a non-seismic event.
Additionally, the cost of earthquake insurance may be a factor. Earthquake insurance can be expensive, with high deductibles, and may not cover much in the event of a claim. The price of earthquake insurance depends on various factors, including the location of the home, the cost to rebuild, the type of construction, and the coverages selected. People may also be unaware of their risk if they live in an area that has not experienced a major earthquake in a long time.
It is important to note that earthquake insurance is not mandatory in California or anywhere else. However, it can provide financial protection and help pay for losses and damage caused by earthquakes.
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Frequently asked questions
Only 13% of California homeowners have earthquake insurance.
Earthquake insurance is not mandatory in California or anywhere else. Many people don't think earthquakes will happen to them, and they also believe it is too expensive. Standard homeowners insurance does not cover earthquakes, and people may be unaware of this.
The cost of earthquake insurance in California depends on various factors, including the age and location of the home. For example, a homeowner in coastal SoCal (Ventura) pays $1500/year with a $30k deductible for a house built in 1975. Meanwhile, a homeowner in NorCal with a house built in 1963 pays $290/year with a 5% deductible.
