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Earthquake Insurance

Image showing house, circles that radiate like earthquake waves, and says "Earthquake Insurance"


Very few private insurance companies offer earthquake insurance in California without CEA backup. It is usually purchased through a state-run insurance pool, the California Earthquake Authority (CEA).  Will he protect you?  Should you buy insurance or retrofit your house?


Four issues to consider in answering that question include

  • Safety
  • Stress from disaster
  • Loss of deductible
  • Comparative cost

Imagine the anguish, loss of housing, and delay in getting your life back to normal if your house came off its foundation.  $5,000 is the allowable personal property claim limit and there is almost no coverage for temporary housing. Earthquakes kill or seriously injure people in soft story, hillside homes, or other vulnerable homes.  A retrofit could save your life; insurance cannot.

You can choose a CEA  5% to 25% deductible in a CEA policy. Premiums and benefits vary accordingly.  Let’s assume you choose to pay a higher premium for the minimum 5% deductible, and that your home is insured for $500,000.  The first $25,000 in earthquake damage would not be covered.  A seismic retrofit normally cost approximately half that and based on evidence damage would be minimal.

The CEA website states, “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.”  So even if you buy insurance, you might collect much less than your policy allows.

We urge you to compare 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 and many all the evidence points  shows they will survive the earthquake just fine

Earthquake Insurance and CEA Solvency

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.    Would the CEA be able to pay the your claims?

The CEA is prepared to pay up to $11.5 billion in claims according to its most recently published financial statement. This is based on its “available capital, risk-transfer coverage, available letters of credit, debt, and post-event prospective participating insurance company assessments.”

Whatever that might mean.  Sounds like they are saying the same thing they said in the bold text above but in language purposely obscure so no one can understand.

In short, the CEA might be able to pay your claim. Then again, it might not.

The CEA has been accumulating a reserve to pay claims ever since it began in 1996. The Loma Prieta and Northridge earthquakes occurred only four years and three months apart.  The losses were so great that for a few years insurance companies refused to offer earthquake insurance at all unless the State of California insured the companies against losses.  The CEA is a joint venture between insurance companies designed to make sure  insurance companies don’t lose money.

Seismic Retrofitting is an Option

What if a major earthquake in Southern California drains that CEA reserve, and a little later the Hayward Fault breaks loose?  What will all your earthquake insurance premium payments get you?

Seismic retrofitting avoids the disaster altogether and rather than dealing with a disaster you are now dealing with an inconvenience.  Your finances have been protected, your health is good,  and you will still have a place to live.

Why is the State of California Worried?

Here’s some info from the USGS Shakeout Scenario:

“The 2008 Great Southern California ShakeOut was based on a potential magnitude 7.8 earthquake on the southern San Andreas Fault— approximately 5,000 times larger than the magnitude 5.4 earthquake that shook southern California on July 29, 2008. It’s not a matter of if an earthquake of this size will happen—but when. And it is possible that it will happen in our lifetime.

Dr. Lucy Jones of the U.S. Geological Survey led a group of over 300 scientists, engineers, and others to study the likely consequences of this potential earthquake in great detail. The result is the ShakeOut Earthquake Scenario, which was also the basis of a statewide emergency response exercise, Golden Guardian 2008.

In an earthquake of this size, the shaking will last for nearly two minutes.

Such an earthquake will cause unprecedented damage —greatly dwarfing the massive damage that occurred in Northridge’s 6.7-magnitude earthquake in 1994. In summary, the ShakeOut Scenario estimates this earthquake will cause over 1,800 deaths, 50,000 injuries, $200 billion in damage and other losses, and severe, long-lasting disruption. The report has regional implications and is a dramatic call to action for preparedness.”

The full publication can be found here:

Areas Served

San Jose,Sunnyvale, Fremont,Oakland,Berkeley
And Surrounding Areas


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License Info

Works' Comp RWCC64393236
Contractors Lic #558462
Bond #SC6334450
Liability Ins PCA 1045011
Link to Contractor's License Board