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Do You Need Earthquake Insurance?

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By Tim Gaspar

It’s been so long since So Cal has had a good shake I think some of us forgot this is earthquake country! 

With so much attention on  wildfire prevention, a lot of us forgot about the other significant danger to our homes. As we were reminded on December 20 with the 6.5 quake in Northern California, we really do live in earthquake country! The question is, should you insure for that?

Well, 90% of Californians don’t think it’s worth it, yes, only 10% of homeowners have earthquake insurance. However, 70% of people can’t find the Pacific Ocean on a world map (that’s true), so I’m not sure going with the majority is a good idea. So why don’t people buy earthquake insurance? Well, here are few misconceptions I’ll clear up now:

Reason #1: The government will step in and help you if your house gets destroyed.

Fact: In a natural disaster, you can collect up to 35% from FEMA and potentially up to $250k in the form of a low-interest SBA loan, but that’s it.

Reason #2: The deductible is huge!

Fact: After the Northridge earthquake, many carriers left California leaving the CEA (California Earthquake Authority) as the only option for many years. However, more recently, several private carriers have entered the earthquake insurance space with all sorts of new products and options, deductibles are now as low as 2.5%. 

Reason #3: It’s super expensive.

Fact: Yeah, it’s pretty expensive. But the rates vary a lot depending on where your house is, the type of construction and coverage option. Realistically though, if you assume your home will be damaged in an earthquake in the next 40 years and invest 40 years of premium, you’ll probably see a good return. 

And if not, I’ll be very old then and will not remember writing this article.

Reason #4: Not much is covered.

Fact: Like any insurance, earthquake policies vary a lot. CEA policies have pretty significant limitations related to pools, chimneys, block walls, fragile items, and more. However, nowadays, many private earthquake insurers have policies that extend coverage for a lot of these items. Be sure to look at all options with your insurance agent and understand what is covered and what’s not.

Just food for thought if you are looking to self insure, it’s more expensive than you think. The wildfires caused the shortage of contractors and cost of construction to skyrocket, and an earthquake would be exponentially worse. The same is true for hotels, rental homes, and extended stay apartments. 

Having a little pain now in paying your premium is a much better option than real pain when you don’t have a roof over your head. 

Ask your insurance agent for what options are available, rates are still low, and it’s a good time to look around.

Tim Gaspar is founder and CEO of Gaspar Insurance in Woodland Hills. In 2017 Gaspar Insurance was named one of the fastest growing private companies in the U.S. by Inc. 5000 and is the sixth fastest growing insurance agency in California. He can be reached with questions about this article at (818) 302.3060.

Editor’s Note: This is an update of an article that originally ran in 2019 – after another quake!

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