When you live in California, earthquakes aren’t a question of if—they’re a question of when. The state sits atop some of the world’s most active fault lines, and tremors are so common that they often fade into the background of daily life. Yet when it comes to financially preparing for a damaging quake, many homeowners remain uncertain about earthquake insurance, FEMA aid, and what protection they truly have.
In a recent episode of
Insurance Hour, industry expert
Karl Susman breaks down the real risks, common misconceptions, and the financial stakes facing California homeowners. His insights highlight a crucial truth: preparing for an earthquake is both a practical and emotional decision—and one that requires clarity long before the ground starts shaking.
The Common Question: Do You Really Need Earthquake Insurance?
Susman says one of the most frequent questions he’s asked is:
“Should I buy earthquake insurance?”
Often followed by:
“Do most people buy it?”
The second question exposes a common mistake: relying on what others do instead of evaluating personal risk. Your neighbors’ choices don’t change your home’s vulnerability. Earthquake insurance should be a personal risk management decision—not a popularity contest.
Earthquakes in California: A Constant Reality
Earthquakes occur in California every day, even if most are too small to feel. But history shows the state is no stranger to major, destructive events.
The
1994 Northridge earthquake caused billions in damage and displaced tens of thousands. It also exposed a serious insurance gap: most homeowners had no earthquake coverage and were forced to rely on limited federal assistance. Many discovered too late that their financial recovery depended largely on their own preparedness—not government aid.
FEMA Relief: Help, Not Home Rebuilding
One of the biggest misconceptions Susman addresses is the belief that
FEMA will rebuild your home after an earthquake. In reality:
FEMA does not replace or rebuild homes.
Instead, FEMA offers two types of assistance:
- Immediate emergency aid for temporary shelter, such as hotel stays when a home is deemed unsafe.
- Low-interest disaster loans through the Small Business Administration (SBA) for repairs or rebuilding—loans that must be repaid, often alongside an existing mortgage.
FEMA is designed to prevent homelessness, not restore property value. Without earthquake insurance, homeowners may face decades of additional debt.
What Earthquake Insurance Really Covers
Earthquake insurance is designed to fill the massive financial gap FEMA can’t:
- Rebuilding or repairing the home
- Replacing damaged personal belongings
- Covering
additional living expenses (ALE) if the home becomes uninhabitable
However, earthquake policies come with
high deductibles, typically
10% to 25% of the home’s insured value. For a $600,000 home, that means paying between
$60,000 and $150,000 out of pocket before coverage kicks in.
But compared to a potential $300,000+ rebuild, the deductible becomes a form of manageable risk versus complete financial devastation.
Understanding Your Risk Tolerance
Susman simplifies the decision-making process:
- Do earthquakes happen in California?
Yes.
- Do they cause property damage?
Yes.
- Could one severely damage your home?
Absolutely.
Just like auto or fire insurance, earthquake insurance is about preparing for what could happen—not predicting when it will happen. Ultimately, the choice comes down to:
- How much equity you have
- How much risk you can carry
- How financially catastrophic a major quake would be for your household
The California Earthquake Authority (CEA)
Most earthquake insurance in the state is offered through the
California Earthquake Authority (CEA). The CEA provides flexible options, including:
- Coverage for structural damage
- Coverage for personal property
- Additional living expense coverage
- Discounts for seismic retrofitting
- Multiple deductible choices
Premiums depend on your location, the age of your home, and construction type. Homes built to modern seismic codes or located away from major faults tend to pay less.
Making an Informed Decision
Earthquake insurance isn’t for everyone—but it should be an informed choice. Consider:
- Home equity: Can you afford to lose it?
- Financial resilience: Could you cover six figures in repairs?
- Peace of mind: Does having coverage reduce anxiety?
What matters most is understanding your exposure—and not relying on myths or assumptions about FEMA help.
Final Thoughts: Preparing Before the Ground Moves
California’s fault lines are part of its identity. While no one can predict the next major quake, homeowners can prepare with smart planning, seismic upgrades, and informed insurance decisions.
As Susman puts it:
“It’s a little money now to avoid potentially a lot of money later.”
Earthquake insurance won’t prevent the next disaster—but it may be the key to recovering from one. Understanding what’s truly at stake—and what assistance you can or cannot expect—ensures you’re not left financially unprotected when the shaking starts.
