The 15% Deductible That Could Still Cost You $100k: Earthquake Insurance Explained
That “Small” Percentage is Based on a Very Big Number
When my friend in Los Angeles got earthquake insurance, he saw the 15% deductible and thought it sounded manageable. After a major quake caused severe damage to his home, he filed a claim. The shock came when the adjuster explained the deductible wasn’t 15% of the damage, but 15% of his home’s total insured value of $700,000. He had to pay the first $105,000 of repairs out of his own pocket before his insurance paid a single dollar. He learned that earthquake insurance isn’t for fixing cracks; it’s for preventing total financial ruin.
My House Cracked, But Earthquake Insurance Didn’t Pay: Understanding the Policy
The Disaster That Wasn’t Disastrous Enough
After a 5.8 magnitude tremor, my coworker found cracks running up his stucco walls and a damaged chimney—about $20,000 in repairs. He was relieved he had earthquake insurance. When he filed the claim, it was denied. Why? His policy had a 15% deductible on his home’s $600,000 insured value, meaning he was responsible for the first $90,000 of damage. Since his repairs were well under that threshold, the insurance paid nothing. He learned the hard way that earthquake coverage is designed to protect you from a total collapse, not from moderate, albeit expensive, damage.
Is Earthquake Insurance Worth the High Cost? A Risk vs. Reward Breakdown
My House Isn’t Just a Home; It’s My Life Savings
My financial advisor asked why I paid $2,000 a year for earthquake insurance. I told him this story: A colleague of mine didn’t have it. After the Northridge quake, his home was condemned. His mortgage wasn’t forgiven, so he was forced to make payments on a pile of rubble while also paying rent elsewhere. It destroyed him financially. For me, that annual $2,000 premium isn’t an expense; it’s a firewall protecting my $800,000 of home equity—my biggest asset—from being wiped out in 60 seconds. The risk is low, but the consequences are unthinkable.
Why Your Homeowners Insurance Offers ZERO Coverage for Earthquakes
The “Earth Movement” Exclusion That Can Wipe You Out
My friend had a fire in his kitchen, and his homeowners insurance covered everything. He thought he was protected from any disaster. Two years later, a major earthquake rendered his house unsafe. He filed another claim, assuming he was covered, only to have it immediately denied. His agent pointed to the “Earth Movement” exclusion clause found in virtually every standard homeowners policy. It specifically states that damage from earthquakes, landslides, and sinkholes is not covered. It was a brutal lesson: if you want protection from shaking, you need a separate, dedicated policy.
How Earthquake Insurance Deductibles REALLY Work (It’s Not What You Think!)
A Percentage of Your Home’s Value, Not the Repair Bill
My sister was comparing two earthquake policies. One had a 10% deductible, the other 20%. She thought this meant if she had $50,000 in damages, she’d pay either $5,000 or $10,000. Her agent corrected this dangerous misconception. The percentage is applied to the total coverage on your home. Her house was insured for $500,000. So, the 10% deductible meant she’d pay the first $50,000 of repairs. The 20% deductible meant she’d pay the first $100,000. It’s a massive number designed to cover only catastrophic damage, not minor repairs.
Calculating Your Potential Out-of-Pocket Cost Even WITH Earthquake Insurance
My “Covered” Loss Still Cost Me $75,000
I ran a disaster scenario for my own home in a quake-prone area. My house is insured for $500,000. My earthquake policy has a 15% deductible. That means my out-of-pocket cost for structural repairs would be a staggering $75,000 before insurance kicks in. My policy has separate, smaller deductibles for my personal belongings and for temporary living expenses. It was a sobering calculation. Having the insurance is critical to avoid total loss, but I realized I still need a serious emergency fund to cover that huge initial deductible.
Does Earthquake Insurance Cover Your Belongings or Just the Structure?
The Quake Destroyed My House AND My Stuff
After a major tremor, a friend’s home was a total loss. His earthquake policy paid to rebuild the structure, but he discovered he had opted out of “Personal Property” coverage to save money. While the house was being rebuilt, he had to pay to replace all his furniture, electronics, and clothes himself—a loss of over $50,000. It taught me that earthquake insurance is often sold à la carte. You have to choose coverage for your dwelling, your belongings, and your temporary living expenses separately. Skimping on one can leave a huge hole in your recovery.
Retrofitting Your Home to Lower Earthquake Insurance Costs
I Spent $7,000 to Save $1,200 a Year
My first earthquake insurance quote was a shocking $3,500 a year. The agent explained my 1960s home wasn’t bolted to its foundation, making it high-risk. He suggested I get a quote for a seismic retrofit. A contractor charged me $7,000 to bolt the house to the foundation and brace the crawl space walls. I sent the certificate of completion to my insurance agent. My new, updated quote was $2,300 a year. The retrofit will pay for itself in premium savings in under six years, and my family is much safer.
Living Near a Fault Line? Why Earthquake Insurance is Non-Negotiable
It’s Not “If,” It’s “When” and “How Bad”
I live less than 10 miles from the Hayward Fault, one of the most dangerous in the country. At a neighborhood meeting, a geologist showed us maps projecting that a major quake here isn’t a possibility, but a statistical probability within my lifetime. He said to think of my home equity as cash sitting on a vibrating table. My annual earthquake insurance premium is my only tool to keep that cash from falling off when the “big one” hits. It’s not a luxury; it’s a mandatory cost of living in a place this beautiful and this risky.
Comparing CEA (California Earthquake Authority) vs. Private Earthquake Insurance
The Choice Between a State Program and a Private Company
When I shopped for earthquake insurance, I had two main choices. The first was the California Earthquake Authority (CEA), a publicly managed but privately funded option. It offered a wide range of deductible choices but had stricter coverage limits. The second was a policy from a private insurer. It had higher coverage limits and included some things the CEA policy didn’t, but it might be harder to qualify for. I ended up choosing a private option for its higher limits, but for many, the stability and flexibility of the CEA is the better choice.
Does Earthquake Insurance Cover Fire Damage Following a Quake? Usually Yes.
The Shaking Stops, But the Danger Doesn’t
My grandpa told me about the 1906 San Francisco earthquake. He said the shaking was terrifying, but the real disaster was the fire that followed from broken gas lines. This worried me, so I asked my agent. He explained a key detail: my standard homeowners policy (which covers fire) specifically excludes fire damage that results from an earthquake. However, my separate earthquake policy does cover fire damage that follows a quake, often called “fire following earthquake.” It’s a critical piece of coverage that bridges the gap between the two policies.
Additional Living Expenses (ALE) After an Earthquake: Is It Covered?
When Your House is Unsafe, Where Do You Go?
After a serious quake, my friend’s house was yellow-tagged, meaning it was too damaged to live in while being repaired. He and his family were suddenly homeless. He was incredibly relieved to find his earthquake policy included “Additional Living Expenses” (ALE) coverage, also called Loss of Use. It paid for his family to stay in a rental apartment for the six months it took to make their home habitable again. Without that coverage, he would have been paying a mortgage and rent simultaneously, a financially impossible situation.
Masonry vs. Wood Frame Homes: How Construction Affects Earthquake Risk & Rates
My Brick House Was a Bigger Risk
My friend and I both bought homes in the same neighborhood. Mine is a charming brick Tudor; his is a standard wood-frame house. When we got earthquake insurance quotes, mine was nearly double his. My agent explained that unreinforced masonry buildings are much more brittle and prone to collapse during an earthquake than flexible wood-frame structures. His house is designed to bend; mine is designed to break. The insurance premium directly reflected that higher risk, and it motivated me to look into the cost of retrofitting my foundation.
Filing an Earthquake Insurance Claim: Documenting the Damage
Photos Are Your Proof When the World is Shaken Up
My uncle, a claims adjuster, gave me this advice: After a quake, if it’s safe, become a photographer. Before you move anything, take hundreds of photos and videos. Get wide shots of the rooms and close-ups of every crack, every broken item, every bit of damage to the foundation. This documentation becomes your undeniable proof when you file a claim. He told me stories of claims being delayed because of poor documentation. In the chaos after a disaster, a full memory card is one of your most valuable financial assets.
Can You Get Earthquake Insurance Outside of California? Yes!
Quakes Happen in More Places Than You Think
My friend was thrilled to move from Los Angeles to Salt Lake City, thinking she could finally ditch her expensive earthquake insurance premium. Her realtor wisely advised her to reconsider. Salt Lake City sits near the Wasatch Fault, a major seismic risk zone. She was surprised to learn that other areas like the New Madrid Seismic Zone in Missouri, and parts of Oregon, Washington, and even Oklahoma, have significant earthquake risk. It was a good reminder that California isn’t the only state where this specialized coverage is a very smart idea.
Is the Land Value Covered by Earthquake Insurance? No.
You Insure the House, Not the Dirt Underneath It
When I bought my house for $900,000, I was tempted to get an earthquake policy for that same amount. My agent stopped me. He explained that insurance is designed to cover the cost to rebuild the structure, not the value of the land it sits on. The land itself is worth about $400,000, and it can’t be destroyed in a quake. We calculated the actual cost to rebuild my house was closer to $500,000. Insuring it for the full market value would have just meant paying a needlessly high premium for coverage I could never use.