Data reveals that only 12% of California households purchased earthquake insurance last year. In a striking reminder of the region’s vulnerability, a photo from the devastating 1989 Loma Prieta earthquake shows wreckage on Highway 880. Federal scientists estimate there is a 20% chance of a stronger earthquake occurring in the Bay Area within the next 30 years. Yet, few residents are taking steps to protect their homes against the impending threat of another major quake.
According to the San Francisco Chronicle, despite the frequency and severity of earthquakes in California compared to other states, only 1.5 million households—approximately 12%—had earthquake insurance in 2023, as reported by the California Department of Insurance.
In California, standard homeowners, condo, and rental property insurance policies do not cover damage or personal property loss caused by earthquakes, nor do they reimburse hotel expenses incurred due to such events. This means that if a significant earthquake strikes, California residents could find themselves bearing the full brunt of all losses and costs on their own.
The low uptake of earthquake insurance among California families is understandable. Premiums can be steep, and since 1989, there have been few significant quakes in the state. Consequently, many young homeowners do not feel an urgent need to prepare for the possible loss of their homes due to an earthquake.
The California Earthquake Authority (CEA), the state’s largest provider of earthquake insurance, has implemented measures to reduce payouts in recent years. Starting last year, the CEA lowered the maximum reimbursement for personal property loss from $200,000 to $25,000 and eliminated the 5% or 10% deductibles for homes valued over $1 million or older non-slab foundation homes built before 1980 that have not been retrofitted.
The CEA has indicated that these changes are a response to rising inflation and increases in reinsurance costs.
Historically, homeowners insurance covered losses resulting from earthquakes, but now, such policies only insure against fire damages following a quake. This shift dates back to the 6.7 magnitude Northridge earthquake in Southern California in 1994, which was the most costly seismic event in U.S. history and ranks tenth among the world’s deadliest natural disasters, according to global risk management firm Aon.
While some insurance companies still offer earthquake insurance on the private market—making up about a third of all earthquake policies in California—most households opt for coverage through the CEA. Their average policy premium is approximately $925, compared to an average of $885 for policies in the private market.
However, data shows that when broken down by coverage options, the CEA’s premiums are actually more affordable and have been steadily decreasing over the last decade. It was only at the end of last year, due to rising reinsurance and home reconstruction costs, that there was a slight uptick in prices.
