Pactio Project

Should I buy earthquake insurance in California?

By December 19, 2018 December 28th, 2018 No Comments
The lines above are seismograms, which are recordings of ground motion during an earthquake. Short lines mean small earthquakes and vice versa. (Photo courtesy of California Governor's Office of Emergency Services)
It’s been over 20 years since California had an earthquake greater than a magnitude of 6.7, but another one will come soon. Earthquake insurance is one way Californians are protecting their property, but some are investing in other ways to protect their property.

Risk and hazard.

Experts are almost 100% confident that an earthquake over a magnitude-6.7 will hit California in the next thirty years, but the exact time or location is unknown. William Ellsworth, former research geophysicist at the U.S. Geological Survey in Menlo Park and now Stanford professor of geophysics, says they are able to make this probability forecast because the known faults around the Bay Area and L.A. have been “in repose for long enough that they could easily produce that earthquake.”
Risk and hazard aren’t synonymous in seismology. A hazard is the earthquake itself, while the risk is “the susceptibility of that structure to be damaged by whatever that hazard is,” Ellsworth said.
The hazard, being the earthquake, will eventually happen even if we don’t know exactly when. “We’re not going to prevent the ground from shaking,” Ellsworth said. But there are ways to reduce risk. Insurance is one way, but making your home less susceptible to earthquake damage, having a well-thought out plan on what to do when an earthquake hits or even understanding what to do in an earthquake are other ways to prepare.
“There’s a tradeoff depending on financial circumstances on putting money into insurance versus reducing the risk,” Ellsworth said.
So, should you buy earthquake insurance?
It depends on how much financial investment you want to make, how big of a risk your home is at and whether you want to take preventative steps or/and have protection for the fallout.
There are government and private options for earthquake insurance. In 2017, the average price of earthquake coverage in California was about $723. The average cost for California Earthquake Authority coverage, which is the state insurance option that insurance companies like Allstate or Progressive sell, was about $688, and other earthquake insurance coverage averaged a cost of $858. The primary private earthquake insurance company in California is Geovera Insurance. Arrowhead also provides residential earthquake insurance.
California Insurance Commissioner Dave Jones just approved a rate reduction of 1.7 percent on Nov. 29 that will go into effect July 1 next year in response to a California Earthquake Authority request. The reduction applies to California Earthquake Authority’s residential policy that covers personal items and the costs to live somewhere else if you are unable to be in your home because of an earthquake.
Sarah Sol with California Earthquake Authority said pricing differs based on a multitude of factors, but it ultimately works like many insurance policies do. For example, do you have $10,000 in coverage or $200,000 in coverage? That will affect your annual cost.
Prices will also vary depending on earthquake risk. “It’s all about the home’s vulnerability to earthquake,” Sol said. You can see your risk here: California earthquake risk map and faults by county.
Here are other factors to consider:
  • Whether you are a homeowner, renter or live in a condo or mobile home
  • Whether your home is retrofit, which includes bolting it to the ground, bracing the chimney and water heater or using plywood to strengthen walls
  • The age of your home
  • The material your home is made out of (e.g. brick homes will cost more)
Here are some helpful resources to determine whether you should buy earthquake insurance at all or to see what kind of coverage exists and how much you might have to pay:

This answer was produced by Pactio and journalist Ashlyn Rollins. Now, it’s time for you to ask your question.

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