Earlier this month, the USGS issued an earthquake advisory. If you read that article, it states “there is 0.006% to 0.2% chance (less than 1 in 10,000 to 1 in 500) of a magnitude 7 or greater earthquake being triggered on the Southern San Andreas Fault within the next seven days through October 7, with the likelihood decreasing over time.” Now I don’t know about you but I don’t go around worrying about things that have less than a 1 in 10,000 chance of happening. But the truth of the matter is that in San Diego we haven’t had a major earthquake since the Easter quake in 2010. Scientists with the USGS estimate that the probability of at least one magnitude 6.7 earthquake somewhere in California within the next 30 years at more than 99 percent. The forecast for that earthquake being a magnitude 7.5 event are 46%. So the advisory, and those forecast numbers, got me thinking about Earthquake insurance and why is it not more common.

On a very basic level, Earthquake Insurance is just what it says – insurance on your property against earthquake damage. The bigger question is why is it not very common. In the early 90s, roughly 33% of all homeowners had earthquake coverage that number is now under 10%. The answer to that is twofold. 1) Earthquake loss is not included in your homeowner’s policy and isn’t a mandatory condition for getting financing. 2) It has also been a very expensive coverage to get. An earthquake policy can cost nearly as much as your basic homeowners policy plus the deductible isn’t a set amount, rather a percentage of your total property limit.

“If you buy an earthquake policy in California and you have a 15 percent deductible, as most people have, it’s very unlikely you’re going to see a payout, except for the Big One,” said Amy Bach, executive director and co-founder of United Policyholders. So there’s little incentive for many people to invest in the insurance.

Earthquake insurance coverage changed radically after the Northridge quake in 1994. Up to that point, insurance companies were required to offer earthquake coverage. The Northridge quake resulted in $19 billion in insured losses. A number which was higher than the total of all earthquake insurance premiums ever collected in California. After Northridge, most insurers refused to write earthquake policies. Eventually the California Earthquake Authority was formed by the state Legislature to be a state-run insurance pool.

The statewide average for Earthquake insurance is about $800/year with the San Francisco area being the highest in the state at $2000-$5000/year. Obviously the exact cost varies based on lots of factors, such as location, size, and how old the home is. Use the California Earthquake Authority’s online premium calculator to get an estimate of what earthquake insurance would cost.

If you are a condo owner, and you looked at that calculator, you may have noticed an option for “Loss assessment coverage”. According to the site, this means “If condominium association imposes an assessment to repair earthquake damage, this coverage may help pay owners share of certain assessments. Available even if association does not have a “master” earthquake policy in force.”