Earthquake insurance pays the policyholder in the event of an earthquake
that causes property damage. Most homeowners insurance policies in California exclude earthquake damage, unless an additional policy is
purchased for this coverage. Federal government loans to repair your primary residence in the event of a catastophic
earthquake may be limited (in 2019 the maximum is $200K) which is generally far below the amount needed to rebuild (or
in many cases repair) a single family home in the Bay Area. Government loans for secondary and vacation homes are not
available, though loans may be available for rental properties.
Most earthquake insurance policies have a high deductible (10-25% of the dwelling coverage limit), which
makes this type of insurance useful if the entire home is destroyed, but not if the home is only slightly damaged. Premiums
depend on location, type of construction, and the probability of an earthquake. As with flood zones, earthquake
seismic zones can change over time. Rates may be less costly for homes made of wood, which withstand
earthquakes better than homes made of brick. When seeking a quote, you will be asked by your agent/broker if the home has
cripple walls and if they are braced and if the home is bolted to the foundation. For information, please visit Earthquakesafety.com. Additional resources are available at Earthquakebracebolt.com.
Another good resource is the California Earthquake Authority (CEA) website. They have a nice calculator if you want to quote coverage options and get an idea of cost for coverage as a homeowner, condo unit owner, renter or mobilehome
As with flood
insurance or insurance on damage from a hurricane or other large-scale disasters, insurance companies must be careful
when assigning this type of insurance, because an earthquake strong enough to destroy one home will probably destroy dozens
of homes in the same area. If one company has written insurance policies on a large number of homes in a particular zip code,
then a devastating earthquake will quickly drain all the company's resources. Insurance companies devote much effort toward
risk management to minimize their exposure to such a situation.