California Earthquake Insurance Rates Are Rising
Published Date: 10/02/2024
Three decades after the 1994 Northridge Earthquake shook Southern California, most homeowners still don’t carry earthquake insurance. Despite living in one of the most seismically active regions in the world, only about 13% of California homeowners have coverage.
That already-low number may dip even further after January 1, 2025 — when the California Earthquake Authority (CEA), the state’s largest earthquake insurer, will raise its rates by an average of 6.8% statewide.
Some policyholders may see small decreases, but others could face rate increases of up to 12%, depending on location, construction type, and specific risk factors.
Insurance expert and independent broker Karl Susman explains what’s driving the rate hike — and what options homeowners still have in an increasingly expensive insurance landscape.
“Costs of reconstruction of our homes have been going up every year,” Susman said. “Not just with inflation, but they’ve been going up pretty dramatically since 2020.”
The Northridge Legacy and the Creation of the CEA
The California Earthquake Authority exists because of one pivotal event: the 1994 Northridge Earthquake.
That quake became one of the costliest natural disasters in U.S. history, causing more than $20 billion in insured losses and pushing some insurers to withdraw from the homeowners market entirely. At the time, carriers offering homeowners insurance were required by law to offer earthquake coverage as well — a risk many decided they could no longer afford.
To prevent a collapse of the state’s property insurance system, lawmakers created the CEA in 1996 as a nonprofit, publicly managed, privately funded organization. The structure allows insurers to keep writing homeowners policies by transferring the earthquake portion of the risk to the CEA, which specializes in that single peril.
Today, the CEA:
- Covers over 1.1 million policyholders
- Represents more than two-thirds of all earthquake insurance sold in California
But even with its size and stability, the CEA faces the same pressures as the rest of the state’s insurance market: inflation, higher rebuilding costs, and rising reinsurance prices.
Why the CEA Is Raising Earthquake Insurance Rates
The 6.8% average rate increase isn’t arbitrary. It reflects two major cost drivers that have accelerated dramatically since 2020.
Reconstruction Costs Are Surging
Rebuilding after an earthquake is far more expensive than it was just a few years ago. The cost of:
- Building materials like lumber, steel, and concrete
- Skilled labor, which is in short supply
- Specialized trades needed for structural repairs
has risen sharply.
“Construction costs have been going up every year — not just with inflation,” Susman explained. “They’ve been going up pretty dramatically since 2020.”
Because earthquake insurance exists to rebuild homes after a major loss, those increased reconstruction costs directly affect how much the CEA must charge to remain financially sound.
Reinsurance Is More Expensive
The CEA, like wildfire and hurricane insurers, buys reinsurance — insurance for insurance companies — to make sure it can pay claims after a catastrophic quake. Global reinsurers, facing more frequent and severe disasters worldwide, have significantly raised their prices.
Those higher reinsurance costs filter down into what policyholders pay.
What the 2025 Rate Increase Means for Homeowners
Starting January 1, 2025, the new rates will apply to all CEA policy renewals:
- The statewide average increase is 6.8%
- Some lower-risk or retrofitted properties may see modest decreases
- High-risk areas and older, unreinforced homes could see increases as high as 12%
The impact will depend on factors such as:
- How close a home is to a major fault
- The age and construction type (for example, older wood-frame homes on raised foundations)
- Whether the property has been seismically retrofitted
While these adjustments are painful, Susman stresses that earthquake insurance is still accessible in California.
“The good news is you can still get earthquake insurance in California from a number of different carriers,” he said. “Unlike wildfire insurance, which is hard to find right now.”
How to Manage Higher Earthquake Insurance Premiums
If your renewal notice arrives with a bigger number than you expected, you still have ways to control the cost while keeping meaningful protection.
Shop Around Beyond the CEA
The CEA is the largest provider, but it isn’t the only one. Several private insurers offer standalone earthquake policies, often with:
- Flexible deductibles
- Customized coverage limits
- Competitive pricing for newer or retrofitted homes
“If your rate does come in from the California Earthquake Authority and you think it’s too high, you can definitely shop around,” Susman noted.
Working with an independent broker can help you compare both CEA-backed and private-market options.
Adjust Your Deductible
CEA policies allow deductibles ranging from 5% to 25% of your home’s insured value. Choosing a higher deductible can bring your premium down, though it increases your out-of-pocket cost after a quake.
“You can also look to change the deductible you have on the policy as well to save some money,” Susman advised.
For example, on a home insured for $500,000:
- A 10% deductible = $50,000 out of pocket
- A 20% deductible = $100,000 out of pocket
In return, the higher deductible could reduce your premium by a substantial amount. The right choice depends on your savings, risk tolerance, and comfort level.
Retrofit Your Home to Earn Discounts
Seismic retrofitting is one of the most effective long-term strategies. It:
- Makes your home safer in a quake
- Reduces expected damage
- Can qualify you for CEA premium discounts
“The Earthquake Authority does offer rate discounts for retrofitting your home,” Susman said. “If your house was built before 1980, is wood-framed, and on a raised foundation, you may qualify.”
Discounts are also available for mobile homes with approved bracing systems.
Homeowners can explore grants and incentives through the California Residential Mitigation Program, including Earthquake Brace + Bolt, which can help cover up to $3,000 of retrofit costs.
Why Earthquake Insurance Still Matters in California
Higher premiums may tempt some homeowners to drop coverage altogether. That’s a costly gamble in a state with California’s seismic profile.
According to the U.S. Geological Survey, there is a 99% chance of a magnitude 6.7 or larger earthquake striking California within the next 30 years. Yet only about 13% of homeowners carry earthquake insurance.
“Given the damage from the 1994 Northridge earthquake,” the report noted, “it’s surprising that only about 13% of California homeowners have earthquake insurance.”
Going without coverage means:
- Paying 100% of repair or rebuilding costs out of pocket
- Facing potential mortgage issues if the home becomes uninhabitable
- Relying on limited federal disaster assistance, which typically comes in the form of low-interest loans, not grants
Standard homeowners policies specifically exclude earthquake damage. Without a separate earthquake policy, even a covered “fire following” claim may not come close to what’s needed to rebuild.
Where Earthquake Insurance Fits in California’s Fragile Insurance Market
The CEA’s single-digit rate increase stands out in contrast to the turmoil elsewhere in California’s insurance landscape, especially for wildfire and homeowners coverage.
While:
- Major carriers have paused or reduced homeowners business
- Wildfire coverage has become harder to find and more expensive
- The FAIR Plan has grown beyond its original design
earthquake insurance remains comparatively stable and available.
The CEA’s nonprofit, quasi-public structure means it doesn’t seek profit — but it must remain actuarially sound. Rate increases, while unpopular, are designed to ensure it can pay claims after a major quake without jeopardizing its financial health.
“Unlike wildfire insurance, which is hard to find right now,” Susman emphasized, “you can still get earthquake insurance in California.”
Looking Ahead: Balancing Affordability and Preparedness
As Californians face rising costs across nearly every line of insurance, the CEA’s 6.8% increase is part of a broader shift toward economic realism — pricing coverage in line with actual risk and rebuilding costs.
The challenge now is to strike a workable balance:
- For homeowners: staying insured without breaking the bank
- For insurers and the CEA: remaining solvent and ready for the next big event
- For policymakers: supporting mitigation efforts and keeping coverage accessible
Earthquake insurance in California is entering a new phase. Yes, it’s more expensive. But it also remains one of the few catastrophe coverages that’s still widely available.
“The good news,” Susman reminded viewers, “is you can still get earthquake insurance in California from a number of different carriers.”
That combination — availability, smarter pricing, and growing incentives for retrofitting — may be California’s best defense against the next seismic shock, both geological and financial.
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