Earthquake insurance

Standard homeowners insurance does NOT cover earthquake damage. Earthquake insurance is a separate policy or endorsement that covers structural damage, personal property loss, and additional living expenses resulting from an earthquake.

44 steps across 12 sections

1. Strongly Recommended

  • Homeowners in seismically active areas (California, Pacific Northwest, New Madrid fault zone in Missouri/Tennessee/Arkansas, parts of Utah, Alaska, Hawaii)
  • Anyone who could not afford to rebuild or repair their home out of pocket
  • Homeowners with a mortgage (though rarely required by lenders)

2. Consider Carefully

  • Renters in earthquake zones (renters earthquake policies are relatively affordable)
  • Homeowners in moderate-risk zones with older construction

3. Probably Not Necessary

  • Areas with minimal seismic activity
  • Homeowners who could self-insure the deductible and have low home values

4. What It Is

  • Not-for-profit, publicly managed organization created by the California legislature in 1996
  • Largest provider of residential earthquake insurance in California
  • Backed by a multi-billion dollar claim-paying capacity
  • Partners with 25+ participating insurance companies who sell CEA policies

5. CEA Homeowners Choice Policy Coverage

  • Dwelling Repair or rebuild your home's structure
  • Personal property Replace damaged belongings (optional, with separate deductible)
  • Additional living expenses (Loss of Use) Temporary housing if home is uninhabitable — NO deductible on this coverage
  • Building code upgrade $10,000 included with every policy; higher limits available
  • Emergency repairs Covered under dwelling coverage

6. CEA Deductible Options

  • Available deductibles 5%, 10%, 15%, 20%, 25% of dwelling coverage
  • Restrictions Homes valued over $1 million OR homes built before 1980 on raised/non-slab foundations without verified seismic retrofit are limited to 15%, 20%, or 25% deductibles

7. How Percentage Deductibles Work

  • Home insured for $400,000 with 15% deductible
  • Deductible = $60,000
  • If earthquake causes $100,000 in damage, you pay $60,000 and insurance pays $40,000
  • If damage is under $60,000, insurance pays nothing

8. Choosing a Deductible

  • Lower deductible (5-10%) = higher premium but more coverage for moderate quakes
  • Higher deductible (20-25%) = lower premium but only kicks in for severe damage
  • Most common choice: 10-15%
  • Consider: Could you cover the deductible from savings or a HELOC?

9. Premium Factors

  • Location Proximity to fault lines is the primary driver
  • Construction type Wood-frame homes cost less to insure (more flexible, less damage-prone) than masonry/brick
  • Age of home Older homes (pre-1980) cost more
  • Foundation type Raised foundations and cripple walls are more vulnerable than slab-on-grade
  • Soil type Homes on soft soil or fill are more expensive (liquefaction risk)
  • Dwelling replacement cost Higher value = higher premium
  • Deductible chosen Higher deductible = lower premium

10. Typical Annual Costs (California)

  • Average $800-$2,000/year for a typical single-family home
  • Lower risk (newer home, low seismicity area, slab foundation): $400-$800/year
  • Higher risk (older home, near major fault, raised foundation): $2,000-$5,000+/year
  • Very high risk (unreinforced masonry near fault): Can exceed $5,000/year

11. CEA Retrofit Discount

  • Homes properly retrofitted can qualify for up to 25% premium discount
  • Retrofit must be verified (not self-reported)
  • Applies to pre-1980 homes on raised foundations

12. Common Retrofits

  • Cripple wall bracing Strengthening short stud walls between foundation and first floor
  • Foundation bolting Securing the wood frame to the concrete foundation
  • Water heater strapping Prevents toppling during shaking
  • Soft-story retrofit For multi-unit buildings with open ground-floor parking

Sources

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