Key Takeaways
- Homeowners insurance does NOT cover earthquake damage. Standard policies specifically exclude seismic events. If an earthquake damages your home and you don't have earthquake insurance, you're on your own financially.
- FEMA assistance is not a substitute for insurance. The maximum FEMA housing grant is $43,600 (FY2025), but the average grant has historically been around $4,200 — a fraction of what most homes would need for major repairs.
- Deductibles are high — typically 10–20% of your dwelling coverage. On a $500,000 home with a 15% deductible, you'd pay the first $75,000 before insurance kicks in.
- The decision depends on your specific risk profile — fault proximity, soil type, building age, and financial situation all matter.
- For homeowners in moderate-to-high seismic zones whose home is their largest asset, earthquake insurance is generally worth considering. For those in very low-risk areas or with significant financial reserves, it may be less necessary.
Disclaimer: This article is for educational purposes only and does not constitute insurance or financial advice. Your situation is unique. Consult a licensed insurance agent and/or financial advisor for personalized guidance.
Does Homeowners Insurance Cover Earthquakes?
No — and this is the single most important fact to understand when evaluating earthquake insurance.
Standard homeowners insurance policies, renters insurance policies, and condo insurance policies all contain explicit exclusions for earthquake damage. If seismic shaking cracks your foundation, collapses a wall, ruptures your plumbing, or shifts your home off its footings, your homeowners insurer will deny the claim.
The only earthquake-related damage that homeowners insurance does cover is fire. If an earthquake ruptures a gas line and your home catches fire, the fire damage is covered under your standard policy. But the structural earthquake damage itself — the cracked foundation, the shifted walls, the broken chimney — is not.
This means that without a separate earthquake insurance policy (or an earthquake endorsement on your homeowners policy), the full cost of earthquake damage falls on you — the homeowner.
The Case FOR Earthquake Insurance
Your Home Is Probably Your Largest Asset
For most American homeowners, their home represents the majority of their net worth. The median home value in the United States is around $400,000, and in seismically active states like California, median values are significantly higher. Earthquake insurance exists to protect this asset.
Consider the scenario: a moderate earthquake causes $200,000 in structural damage to your $500,000 home. Without earthquake insurance, you need to come up with $200,000 out of pocket — or take on significant debt — to make your home livable again. With earthquake insurance and a 15% deductible ($75,000), you'd pay $75,000 and the insurance would cover the remaining $125,000.
Neither scenario is painless, but the insurance substantially reduces the financial hit.
FEMA Will Not Rebuild Your Home
Many homeowners operate under the assumption that if a major earthquake strikes, the federal government will step in and help them rebuild. This assumption is dangerously incorrect.
What FEMA actually provides (FY2025):
| FEMA Assistance Type | Maximum Amount | What It Covers |
|---|---|---|
| Housing Assistance (IHP) | $43,600 | Home repair, rental assistance, temporary housing |
| Other Needs Assistance | $43,600 | Personal property, medical, moving, other disaster expenses |
| Total Maximum | $87,200 | Combined maximum per household per disaster |
| Serious Needs Assistance | $770 | Immediate upfront payment for emergency needs |
The reality of FEMA grants:
- The average FEMA grant through the Individuals and Households Program has historically been approximately $4,200, according to the Government Accountability Office.
- FEMA assistance requires a presidential disaster declaration. Not all earthquakes trigger one.
- FEMA grants are intended as a supplement to insurance, not a replacement. FEMA itself states that disaster assistance is meant to help survivors meet basic needs and start recovery — not restore pre-disaster conditions.
What about SBA disaster loans?
The Small Business Administration offers disaster loans of up to $500,000 for home repair. But these are loans — they must be repaid with interest (typically 2.5–4%). Taking on a six-figure loan to repair earthquake damage is a fundamentally different financial proposition than having insurance pay for it.
The Math of Going Uninsured
Here's a scenario that illustrates the financial exposure of not carrying earthquake insurance:
| Scenario | $400K Home | $600K Home | $1M Home |
|---|---|---|---|
| Earthquake damage (40% of value) | $160,000 | $240,000 | $400,000 |
| FEMA max housing grant | $43,600 | $43,600 | $43,600 |
| Shortfall without insurance | $116,400 | $196,400 | $356,400 |
| SBA loan needed to cover shortfall | $116,400 | $196,400 | $356,400 |
Even in a scenario where FEMA provides its maximum housing assistance — which is far from guaranteed — the homeowner faces a six-figure gap. Most homeowners cannot absorb this loss without taking on substantial debt, potentially selling their home at a loss, or walking away from their largest investment entirely.
Earthquake Damage Is Expensive to Repair
Foundation repairs alone can run $10,000 to $100,000+ depending on the type and severity of damage. If a home is shifted off its foundation, repair costs can easily exceed $150,000. Complete rebuilds after severe earthquake damage can cost $200–$400 per square foot or more in high-cost markets like California.
Unlike water damage or fire damage — which are covered by homeowners insurance — earthquake damage leaves you financially exposed unless you have specific earthquake coverage.
The Case AGAINST Earthquake Insurance
Earthquake insurance has legitimate drawbacks that make it a poor fit for some homeowners. Being honest about these limitations is essential for making an informed decision.
High Deductibles Mean Big Out-of-Pocket Costs
The most common criticism of earthquake insurance is the high deductible. Unlike your homeowners policy with a $1,000 or $2,500 deductible, earthquake insurance uses percentage-based deductibles that can be enormous in dollar terms.
What deductibles actually look like:
| Home Value | 10% Deductible | 15% Deductible | 20% Deductible |
|---|---|---|---|
| $300,000 | $30,000 | $45,000 | $60,000 |
| $500,000 | $50,000 | $75,000 | $100,000 |
| $750,000 | $75,000 | $112,500 | $150,000 |
| $1,000,000 | $100,000 | $150,000 | $200,000 |
This means that for many moderate earthquakes — the kind that causes $20,000 to $50,000 in damage — your earthquake insurance might not pay anything at all because the damage doesn't exceed your deductible. According to FEMA, most earthquake-damaged homes experience damage that does not exceed typical insurance deductibles.
Earthquake insurance is really designed for major events — the kind that cause $100,000+ in damage or total destruction.
Premiums Add Up Over Time
If you pay $1,500 per year for earthquake insurance and live in your home for 30 years, you'll have spent $45,000 in premiums. If no significant earthquake occurs during that time — which is statistically the most likely outcome for any individual homeowner — that money is gone.
Of course, this argument applies to all insurance. You pay for car insurance hoping you'll never use it. But the relatively high premiums combined with the high deductibles make the cost-benefit calculation more challenging for earthquake insurance than for many other types of coverage.
Low Risk Areas May Not Justify the Cost
If you live far from known fault lines, on stable bedrock, in a modern home built to current seismic codes — your actual earthquake risk may be very low. In these situations, the annual premium may not be justified by the probability of a claim.
Limited Personal Property Coverage
Under the CEA's current policies, personal property coverage is capped at $25,000 for homeowners. If you have expensive electronics, artwork, furniture, or other belongings, this limit may feel inadequate relative to the premium you're paying.
The Deductible Reality: Understanding What You'd Actually Pay
Because earthquake insurance deductibles confuse many homeowners, it's worth walking through exactly how they work in a claim scenario.
Example: $500,000 Home with 15% Deductible
Your deductible: $75,000 (15% × $500,000 dwelling coverage)
| Earthquake Damage Amount | You Pay | Insurance Pays |
|---|---|---|
| $25,000 | $25,000 | $0 (damage below deductible) |
| $50,000 | $50,000 | $0 (damage below deductible) |
| $75,000 | $75,000 | $0 (damage equals deductible) |
| $100,000 | $75,000 | $25,000 |
| $200,000 | $75,000 | $125,000 |
| $350,000 | $75,000 | $275,000 |
| $500,000 (total loss) | $75,000 | $425,000 |
The pattern is clear: earthquake insurance provides the greatest benefit in severe-damage and total-loss scenarios. For minor to moderate damage, you'll likely pay the full cost yourself.
Why This Still Matters
Even with a $75,000 deductible, the insurance is covering $425,000 in a total-loss scenario. Without insurance, you'd need to find $500,000 — through savings, loans, or selling the property — to rebuild. The deductible is painful, but it's a fraction of what a total loss would cost.
The question is really: can you absorb the cost of a worst-case scenario without insurance? For most homeowners, the answer is no.
A Risk-Based Decision Framework
Whether earthquake insurance is worth it for you depends on a combination of risk factors and financial circumstances. Here's a framework for thinking through the decision.
Step 1: Assess Your Seismic Risk
Fault proximity is the most important factor. The closer you live to an active fault, the higher your risk of damaging ground motion.
- Within 5 miles of a major active fault: High risk
- 5–15 miles from an active fault: Moderate risk
- 15–30 miles from an active fault: Low-moderate risk
- More than 30 miles from any active fault: Lower risk (but not zero)
Check your proximity to fault lines: Earthquake Fault Line Map
Soil type amplifies or reduces shaking. Soft soils, fill, and areas prone to liquefaction experience much stronger shaking than bedrock sites. A magnitude 6.0 earthquake might cause minor damage on bedrock but severe damage on soft soil just a few miles away.
Building characteristics affect vulnerability significantly:
| Factor | Higher Risk | Lower Risk |
|---|---|---|
| Year built | Before 1980 (pre-modern seismic codes) | After 2000 (modern codes) |
| Construction | Unreinforced masonry, brick | Wood frame |
| Foundation | Raised/crawl space (unretrofitted) | Slab-on-grade or retrofitted |
| Stories | Multi-story | Single story |
| Condition | Deferred maintenance, existing cracks | Well-maintained |
Step 2: Evaluate Your Financial Exposure
Ask yourself these questions:
- What is your home worth? The higher the value, the greater the potential loss.
- What's your mortgage situation? If you still owe $300,000+ on your home, you could end up paying a mortgage on a home you can't live in.
- Do you have emergency savings? Could you cover a $50,000–$100,000 deductible if needed?
- Could you afford to rebuild without insurance? For most homeowners, the answer is no.
- What percentage of your net worth is tied up in your home? The higher this percentage, the more vulnerable you are to a catastrophic earthquake loss.
Step 3: Consider Your Risk Tolerance
Some people sleep better knowing they have coverage, even if they never use it. Others are comfortable self-insuring against low-probability events. Neither approach is objectively wrong — it depends on your personal risk tolerance and financial situation.
Decision Matrix
| Your Situation | Recommendation |
|---|---|
| High-seismic zone, home is primary asset, limited savings | Strongly consider purchasing |
| Moderate-seismic zone, significant mortgage balance | Worth serious consideration |
| High-seismic zone but very high net worth relative to home value | Personal choice — can afford to self-insure |
| Low-seismic zone, modern construction, on bedrock | Lower priority — evaluate cost |
| Renter with minimal belongings in low-risk area | Probably not necessary |
| Renter in high-seismic zone with valuable belongings | Consider renters earthquake coverage (low cost) |
Cost vs. Loss Scenarios
The following table compares the cumulative cost of earthquake insurance premiums over time against potential losses from a damaging earthquake. This can help frame the financial decision.
Scenario: $500,000 Home, 15% Deductible, $1,500/year Premium
| Time Frame | Cumulative Premiums Paid | Major Earthquake Damage (40% of value = $200K) | Without Insurance, You Pay | With Insurance, You Pay (deductible) | Net Benefit of Insurance |
|---|---|---|---|---|---|
| Year 5 | $7,500 | $200,000 | $200,000 | $75,000 + $7,500 = $82,500 | Saved $117,500 |
| Year 10 | $15,000 | $200,000 | $200,000 | $75,000 + $15,000 = $90,000 | Saved $110,000 |
| Year 20 | $30,000 | $200,000 | $200,000 | $75,000 + $30,000 = $105,000 | Saved $95,000 |
| Year 30 | $45,000 | $200,000 | $200,000 | $75,000 + $45,000 = $120,000 | Saved $80,000 |
Even after 30 years of paying premiums, if a major earthquake causes significant damage, insurance still saves you a substantial amount. The breakeven calculation shifts only if the damage is minor enough to fall below your deductible — in which case you wouldn't receive an insurance payout regardless.
Total Loss Scenario: $500,000 Home Destroyed
| Time Frame | Total Premiums | Without Insurance | With Insurance (deductible + premiums) | Net Savings |
|---|---|---|---|---|
| Year 5 | $7,500 | $500,000 | $82,500 | $417,500 |
| Year 10 | $15,000 | $500,000 | $90,000 | $410,000 |
| Year 20 | $30,000 | $500,000 | $105,000 | $395,000 |
| Year 30 | $45,000 | $500,000 | $120,000 | $380,000 |
In a total loss scenario, the value of earthquake insurance is overwhelming regardless of how long you've been paying premiums.
What Happens If You Don't Have Earthquake Insurance
If a damaging earthquake strikes and you have no earthquake coverage, your options are limited:
FEMA Disaster Assistance
As outlined above, FEMA's maximum housing grant is $43,600, and the average payout is around $4,200. Importantly, your area must receive a presidential disaster declaration before any FEMA individual assistance is available — and not all earthquakes trigger such declarations.
SBA Disaster Loans
The SBA offers loans up to $500,000 for home repair after a declared disaster at low interest rates (typically 2.5–4%) with repayment terms up to 30 years. But these are loans — you must repay them. A $200,000 SBA disaster loan at 3% over 30 years costs approximately $843 per month on top of your existing mortgage.
Other Options
If you have sufficient savings or home equity, you might pay for repairs directly — but few homeowners have $50,000–$200,000+ readily available. Some sell earthquake-damaged properties at a steep discount. In the worst cases, homeowners who owe more on their mortgage than their damaged home is worth may face foreclosure — still owing payments on a home they can't live in.
Special Considerations
Renters
If you rent, earthquake insurance is much more affordable — often $100 to $300 per year — because it only covers your personal belongings and additional living expenses, not the building structure. If you have valuable electronics, furniture, or other belongings, renters' earthquake insurance can be a cost-effective way to protect them.
Your landlord's insurance does not cover your personal property in an earthquake. Earthquake insurance for renters
Condo Owners
Condo owners face a unique situation. Your HOA's master policy may cover the building's structure, but it typically won't cover earthquake damage to common areas. If the HOA needs to levy a special assessment to cover earthquake repairs, you could be on the hook for tens of thousands of dollars. CEA condo policies include up to $100,000 in loss assessment coverage for this scenario.
Homeowners Near Specific Fault Lines
If you live near a major fault system, your risk calculation shifts significantly. Research the specific faults in your area:
- San Andreas Fault — California's most well-known fault; capable of M7.5+ earthquakes
- Hayward Fault — Runs through the East Bay; USGS considers it one of the most dangerous faults in the U.S.
- Cascadia Subduction Zone — Pacific Northwest; capable of M9.0+ megathrust earthquakes
- New Madrid Seismic Zone — Central U.S.; historically produced some of the largest earthquakes in North American history
Earthquake Risk Assessment Tools
Several tools can help you understand the seismic risk at your specific address:
- The USGS Earthquake Hazards Program provides seismic hazard maps showing expected ground motion levels across the United States.
- The CEA offers a premium calculator that reflects the assessed risk at your California address.
- Our earthquake risk assessment tool can help you evaluate your exposure.
Ways to Reduce Costs While Maintaining Coverage
If you've decided earthquake insurance is worth it but the premiums feel steep, there are strategies to bring costs down:
Choose a higher deductible — Moving from a 10% to a 15% or 20% deductible can significantly reduce your annual premium. You're accepting more out-of-pocket risk in exchange for lower ongoing costs.
Retrofit your home — Seismic retrofitting can qualify you for premium discounts of up to 25% with the CEA, and it reduces your actual risk of damage. The cost of retrofitting (typically $3,500 to $8,700) can pay for itself in premium savings within a few years. Earthquake retrofitting guide
Select Homeowners Choice over Standard — If you're a CEA policyholder, the Homeowners Choice policy lets you exclude personal property and loss of use coverage, reducing your premium. This makes sense if you have modest personal property or could stay with family after an earthquake.
Shop around — Get quotes from both the CEA and private insurers. Rates can vary significantly between companies for the same property.
Bundle with earthquake preparedness — Some insurers consider the overall risk profile of your home. Having secured water heaters, anchored furniture, and a well-maintained structure may factor into your risk assessment.
The Bottom Line
Earthquake insurance is not a one-size-fits-all decision. It carries real costs — premiums that may never result in a claim, and deductibles that are uncomfortably large. But it provides a financial safety net against a catastrophic event that homeowners insurance does not cover.
For homeowners in seismically active areas whose homes represent a significant portion of their net worth, earthquake insurance is generally worth serious consideration. For homeowners in very low-risk areas with modern homes on stable ground and substantial financial reserves, self-insuring may be reasonable.
Whichever direction you lean, make the decision actively. Don't assume your homeowners policy covers earthquakes (it doesn't). Don't assume FEMA will bail you out (it can't). Talk to a licensed insurance agent, get quotes, and decide based on your specific situation.
For California-specific coverage options and costs: California Earthquake Insurance Guide
For earthquake preparedness steps you can take today: How to Prepare for an Earthquake
Sources
- Federal Emergency Management Agency (FEMA). "Earthquake Insurance." fema.gov/earthquake/insurance
- Federal Register. "Notice of Maximum Amount of Assistance Under the Individuals and Households Program." October 2024. federalregister.gov
- Insurance Information Institute (III). "Background on: Earthquake Insurance and Risk." iii.org
- California Earthquake Authority (CEA). "Homeowners Coverage Options." earthquakeauthority.com
- National Association of Insurance Commissioners (NAIC). "Earthquake Insurance." naic.org
- U.S. Geological Survey (USGS). "Earthquake Hazards Program." usgs.gov
- California Department of Insurance. "Earthquake Insurance." insurance.ca.gov
- Government Accountability Office (GAO). Reports on FEMA Individual Assistance program payouts. gao.gov