Image showing house and text saying earthquake insurance

Earthquake Insurance, Not Always the Best Option

Will earthquake insurance protect you?  Should you buy earthquake insurance or retrofit your house?  Maybe both?

In 1994 and 1989 California Earthquakes Insurance company losses exceeded the total earthquake insurance premiums ever collected.  For a few years insurance companies refused to offer earthquake insurance at all.  They would only re-enter the market if the State of California guaranteed the insurance companies would not sustain any losses in another earthquake.  This is how the California Earthquake Authority was born.

Should I Carry Earthquake Insurance or Retrofit my House?

One must consider three factors before answering this question:


Earthquake insurance will not protect you from harm.  Earthquakes can kill or seriously injure people, especially in soft story, hillside, or other vulnerable homes.  A retrofit could save your life; earthquake insurance cannot.


Losing a home and/or bodily injury creates extreme stress.  This makes getting your house and life back to normal difficult and time consuming.  Besides Red Cross shelters temporary housing alone will be difficult to find and cost a fortune.  You will probably need to leave the area and stay with relatives.

Financial loss

Temporary housing and loss of work can add up.  Structural earthquake damage to a home can be considerable; even devastating, and very expensive to repair.  An added concern is that due to high demand finding a contractor will be difficult to find; delaying rebuild time.

Even if you have insurance you might not be able to collect on it.

A magnitude 7.0 earthquake on the Hayward Fault is projected to cause up to $9.5 billion in insured residential losses and the Hayward Fault is overdue.   If the equally dangerous San Andreas Fault in Los Angeles ruptures another $12 billion can be added to that.  This greatly exceeds the CEA’s stated reserves. In the event these earthquakes happen more or less at the same time, then what?

In July of 2016 the CEA website stated, “If an earthquake causes insured damage greater than the CEA’s claim-paying capacity, policyholders with earthquake damage may be paid a prorated portion of their covered losses. Or, the CEA Governing Board may approve installment payments.”  

In July of 2018 it says in its FAQ page:

Q. Could CEA pay all of its claims if there is an earthquake?

A. CEA has a claim-paying capacity of more than $15 billion. CEA could cover all claims if the 1906 San Francisco, 1989 Loma Prieta, or 1994 Northridge earthquake reoccurred.

The Northridge quake was much smaller than the expected mega earthquake waiting to happen in Los Angeles. The rupture and damage on the Hayward Fault will be far greater than the 1989 earthquake.  Insurance companies only cover their insured.  No one had insurance in the 1906 earthquake so those claims would have amounted to zero.  Nor does it say anything about a Southern and Northern California event happening simultaneously.  It is what they don’t say that should concern us the most.

Seismic Retrofitting is an Option

We urge you to compare the costs of a retrofit versus insurance.  Insurance and retrofits are not mutually exclusive. Maybe you can afford both.  But if not, remember, you pay for a retrofit only once.  The cost of a retrofit usually has a pay back of 4-6 years

Seismic retrofitting can allow you to avoid the most serious consequences of the disaster altogether and rather than dealing with a catastrophe you are now dealing with an inconvenience.  In short, a seismic retrofit can protect your home, your  finances, and your health.  All the evidence shows that you and your house should be fine and the rest of it should be easy.