Earthquake Insurance in California: The Math Nobody Shows You
I want to start with a confession: this is one of the few insurance topics where I don't have a default recommendation. Earthquake insurance is genuinely a "it depends" situation — and I know that's not what anyone wants to hear from their insurance guy. But I'd rather be honest with you than talk you into something without showing you the full picture first.
So let's look at the full picture.
First, a little history — because it actually matters
Growing Up Covered Insight
Before 1994, earthquake insurance was relatively available and relatively affordable in California. Then the Northridge earthquake hit on January 17th of that year — 4:30 in the morning, San Fernando Valley, magnitude 6.7. Around $20 billion in residential damage alone. About half of it insured.
The insurance industry was caught completely off guard. They'd dramatically underestimated what even a moderate California earthquake could do to a dense urban area. And because California law required that any insurer selling homeowners policies also had to offer earthquake coverage, companies faced a brutal choice: stay exposed to catastrophic risk, or stop writing homeowners insurance entirely.
By 1995, companies representing nearly 95% of California's residential insurance market had either stopped writing new policies or severely restricted them. Homeowners couldn't get coverage. Mortgages couldn't close. The California housing market was legitimately in freefall.
So the California Legislature stepped in and created the California Earthquake Authority (CEA) in 1996 — a publicly managed, privately funded nonprofit that would carry the earthquake risk so private insurers could get back to writing homeowners policies.
This history isn't just trivia. It explains exactly why the product looks the way it does today: the deductibles are high, the premiums are significant, and the coverage is more limited than people expect. The CEA was designed to survive a catastrophic event. It was not designed to be cheap.
The two numbers that change the conversation
The premium
In the Bay Area, earthquake insurance premiums can run close to — sometimes equal to — what you're already paying for your standard homeowners coverage. You could be looking at roughly doubling your annual insurance spend for one additional coverage.
That number surprises almost everyone. And it's not a reason not to buy it — but it should be a number you see clearly before deciding.
The deductible
Here's where I spend most of my time explaining things, because the earthquake deductible works completely differently from every other deductible you have.
The standard CEA earthquake deductible is 15% of your dwelling coverage limit. Not a flat dollar amount. A percentage.
Let's do the easy math: home insured for $1,000,000 — which is genuinely common in the Bay Area — means your deductible is $150,000.
Not $2,500. Not the $1,000 on your homeowners policy. $150,000 out of pocket before your earthquake coverage pays a single dollar.
Here's why that matters in practice: both the 1989 Loma Prieta earthquake and the 1994 Northridge earthquake produced a lot of real, painful, expensive damage to homes — but the majority of it was moderate damage, not total losses. What that means is that a meaningful number of people who had earthquake coverage and suffered real earthquake damage collected nothing, because their loss didn't clear their deductible.
Earthquake insurance is protecting you against the catastrophic scenario — the total loss, the major structural failure. It is not protecting you against "significant but survivable."
Know what you're buying.
Wait — you can actually buy down the deductible
Here's something most people don't know: some carriers offer lower deductible options — typically 10% or 5% of your dwelling limit — for a higher premium.
I walked a client through this a few years ago. Big house, kids approaching college age, clear plan to sell and downsize in about 10 years. They came in and asked me to model out earthquake coverage specifically over that 10-year window.
We ran the numbers at 15%, 10%, and 5% deductibles. At 5%, they were paying meaningfully more each year — but the total additional premium over 10 years was less than the difference in deductible exposure if a significant earthquake hit. The breakeven math worked in their favor.
They bought it with the lower deductible. Smart people doing smart math on their biggest asset.
That's the exercise worth doing.
But what about retrofitting instead?
A lot of Bay Area homeowners invest in earthquake risk through the house itself rather than an insurance policy — or do both.
The most common approaches:
Foundation bolting / cripple wall bracing — Older homes (roughly pre-1980) often sit on unbolted wood frames above the foundation. Bolting the house down is one of the most cost-effective things you can do. The CEA's Earthquake Brace + Bolt program actually offers grants to help cover it for qualifying homes.
Soft-story retrofits — Classic San Francisco situation: ground-floor parking or commercial space below residential units, not enough shear walls. SF has mandated these retrofits for qualifying buildings. If you own one of these, you probably already know it.
The retrofit angle has a compelling triple effect: it reduces your actual risk of damage, can increase your property value, and can lower your earthquake insurance premium. Some people do both insurance and retrofit. Some just retrofit. Some just buy the policy. None of those is automatically right or wrong — it depends on your building, your budget, and your plan for the property.
How to actually think about this
Here's the framework I walk through with clients:
Know your deductible in dollars. Take your dwelling limit and multiply by 0.15. That's your out-of-pocket number before the policy pays anything. Is that a manageable setback for your household, or a life-altering one?
Think about your time horizon. Are you in this house for 5 years or 30? The probability math changes.
Ask about the buydown. Get quotes at 15%, 10%, and 5%. Compare the cumulative premium difference to the cumulative deductible exposure difference over your time horizon. Sometimes the math is obvious.
Ask about retrofit options first. Before or alongside getting earthquake quotes, find out what a foundation bolt or soft-story assessment would cost. It may change how you think about the policy.
The stat that should bother all of us
Only about 13% of California homeowners with residential insurance also carry earthquake insurance. We are one of the most seismically active regions in the world, and 87% of homeowners here are betting it won't be that bad.
I'm not telling you that to scare you into buying a policy. I'm telling you because an intentional decision — made with the actual numbers in front of you — is always better than a default one.
If you've never actually gotten an earthquake quote with the premium, the deductible in real dollars, and the buydown options side by side, that's the 15-minute conversation worth having.
No pressure. Just clarity.
Book time here or send over your homeowners dec page and we'll run the numbers together.
Zach Nadler is a 4th generation insurance broker at Nadler Insurance in San Carlos, CA. Growing Up Covered is his attempt to make insurance make sense — through storytelling, real math, and the occasional dinner table reference.