How Does Earthquake Insurance Work? What California Homeowners Need To Know

In California, the risk of earthquakes can be a real threat to your home. If an earthquake damages your house, do you have the proper coverage to protect your property?

Common questions you may wonder include:

Does insurance cover earthquakes?
What is earthquake insurance?
Why do I need to insure against earthquakes?
How does earthquake insurance work in California?
What should I do if my property is damaged in an earthquake?

We’re here to help you find the answers. Let’s dive into how earthquake coverage works.

Does Insurance Cover Earthquakes?

No, a standard homeowners insurance policy does not cover earthquakes or other ground movements.

However, you are able to purchase separate earthquake coverage in addition to your standard policy to ensure your property is protected in the event of an earthquake.

In California, these policies are often purchased through the California Earthquake Authority (CEA).

If you are concerned about earthquake coverage, it may be a wise decision to add this extra coverage to your policy.

What Is Earthquake Insurance?

Earthquake insurance protects your home against damage earthquakes cause to your home and belongings.

It is a separate policy purchased on top of your current homeownwers insurance.

Standard insurance policies typically do not protect against earthquake-related damage, meaning you must have extra earthquake coverage to file a claim for damage caused by earth movements.

Here’s how earthquake insurance usually works:

After an earthquake, you file a claim.
You pay a deductible set by your insurance agreement.
The insurer then covers damage up to your property limit.

Having earthquake coverage prevents homeowners from having to pay for earthquake-related repairs out of pocket.

However, there are some exclusions to what’s included in your earthquake insurance policy. Homeowners should review their insurance contracts carefully to see what’s included in their earthquake policy.

What Does Earthquake Insurance Cover?

Earthquake insurance protects the structure of your home, personal items, and additional costs that may be associated with damage from an earthquake.

Earthquake insurance policies typically include:

Dwellings (aka the physical structure of your home)
Your belongings contained within your home, like furniture, clothing, and electronics
Additional living expenses (ALE), which are the charges you incur for things like temporary housing and food if your home is uninhabitable after a disaster
Building code upgrades to bring your home up to current standards when rebuilding

However, earthquake insurance doesn’t cover everything. Some things may be limited or excluded from your policy, so it’s important to review your contract and understand the terms of your agreement with your insurer.

Things that earthquake insurance is unlikely to cover include:

Other structures, like detached garages, fences, pools
Landscaping and outdoor items

Earthquake Risk in California

If you’re a homeowner in California, you have extra cause to be concerned about earthquakes.

It’s no secret that residences in California are at a higher risk for earthquakes. The state has many seismic zones that put certain areas at high risk.

California rests on the boundary between two major tectonic plates: the Pacific Plate and the North American Plate. This is known as the San Andreas fault system, and it means there is a higher likelihood of earth movements in the region.

In addition to San Andreas, there are over 15,000 known faults in California, with 500 of those faults being considered active. The complex geology of the state puts many homes near active faults and microplates, leading to increased risk of earthquakes.

There is a long history of significant earthquakes in California.

In April 1906, one of the most significant earthquakes in recorded history shook San Francisco and the surrounding region. Not only did the magnitude 7.9 earthquake wreak havoc on the area, but it also resulted in a devastating fire. The earthquake is estimated to have spanned 296 miles, left 3,000 dead, 225,000 homeless, and destroyed 28,000 buildings (a $400 million total monetary loss).

Similarly, the 1994 Northridge earthquake in Southern California also caused many severe losses. The magnitude 6.7 earthquake was the costliest earthquake disaster in U.S. history, causing $20 billion in damage and over $40 billion in economic loss. The disaster was so significant that it spurred the Federal Emergency Management Agency to award the state nearly $20 million to accelerate hazard zoning under the Seismic Hazards Mapping Act of 1990.

Based on statewide analysis, there is a 99.7% chance that California will experience a 6.7 magnitude or larger earthquake within the next 30 years.

Because of the known risk within the region, many California homeowners may find it worthwhile to invest in earthquake insurance to protect their property in the event of a major earthquake.

What Is The California Earthquake Authority (CEA)?

After the 1994 Northridge earthquake, it became clear that private insurers couldn’t handle that much widespread damage alone. The state established the California Earthquake Authority (CEA) to ensure that residents would have coverage for major seismic events.

The CEA is a publicly managed and privately funded entity that offers affordable, basic coverage. It was created to make earthquake insurance accessible.

Because of the high risk, private insurers often struggle to offer plans at affordable rates. The CEA is a state-managed market pool designed to provide residents with basic coverage at a price they can reasonably pay.

The CEA is the primary provider of residential earthquake insurance in California. However, you don’t buy an earthquake insurance policy from the CEA directly.

Instead, you purchase a CEA policy through your existing insurer. The CEA has a list of participating residential insurance companies. For more information, see the organization’s guide on how to buy a residential earthquake insurance policy.

How Much Does Earthquake Insurance Cost?

The cost of earthquake insurance varies greatly by region. The pricing of earthquake coverage is determined based on estimated risk and property value.

In lower-risk regions like the East Coast, policies can be less than $300/year. The average cost of earthquake insurance in the United States is $800/year.

In California, however, earthquake insurance is likely to come with a much higher price tag due to potential risk. On average, a policy for a single-family home can cost around $1,874/year.

The price of earthquake insurance can vary significantly from property to property. There are several key factors that play a role in determining price, including:

Location (especially proximity to active faults)
The age of your home
Construction style and the use of earthquake-resistant materials and designs

How To Deal With an Earthquake Insurance Claim

During an earthquake damage insurance claim, many homeowners choose to hire a public adjuster.

A public adjuster is a licensed insurance industry professional who advocates on your behalf during the claim process and can make recovering from a loss easier. They’ll fight to ensure you receive an optimal claim settlement.

If you’re struggling to understand earthquake coverage, dealing with a tricky insurance situation, or just want an expert on your side, consider hiring a public adjuster.

During the claim process, a public adjuster will:

Review your policy to determine applicable coverage
Assess, investigate, and document damage to your property
Record and gather evidence to substantiate your claim
Evaluate and estimate the compensation needed to cover all damages
Advocate on your behalf and negotiate with the insurance company to achieve a better outcome

Contact Ironside Claims today for a no-cost consultation with a licensed public adjuster specializing in earthquake insurance claims. Ironside Claims’s public adjusters have years of experience handling complex claims and helping homeowners achieve better settlements.