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Earthquake insurance (California Earthquake Authority)
CEA since 1996· Insurance type
Depends on youExperts differ; the right answer depends on your situation.
Separate coverage for quake damage, which home and most commercial property policies exclude; the CEA writes most California residential quake policies.
See it on the Personal Finance & Estate map →How it works
After the 1994 Northridge quake caused roughly $15 billion in insured losses, most insurers stopped or restricted new California homeowners policies. The state answered in 1996 with the California Earthquake Authority, a publicly managed, privately funded insurer sold through participating companies. Deductibles are high, 5–25% of dwelling coverage, and only about 1 in 10 California homeowners buy it. Insurers must offer it with homeowners policies. Commercial buildings buy coverage in the private market; lenders often require it when seismic studies show high probable loss.
Why it matters for you
Depends on you. A major California quake is likely within decades; with high deductibles, the policy protects against near-total loss, not routine repairs.
Think of it like
Like a catastrophe-only reserve: you self-insure the first slice of damage, and the policy covers a collapse.
Rules, limits and sources (2026)
California Insurance Code Secs. 10081 onward; CEA annual reports; the USGS UCERF3 forecast (2015) puts the 30-year odds of a magnitude 6.7 or larger California quake above 99%.
Watch out for
Whether the CEA could pay every claim after a mega-quake, and whether its premiums are fair, is debated; seismic retrofits can earn discounts.
Connections (2)
▸Earthquake insurance (California Earthquake Authority) is sold separately from Homeowners insurance & the California FAIR PlanStandard practice
How they connect
Standard California homeowners policies exclude earth movement, so quake damage requires a separate policy. Insurers selling homeowners coverage must offer earthquake coverage, usually a CEA policy, which you buy as a stand-alone add-on with its own premium and a deductible of 5–25% of the dwelling limit.
When it applies
The mandatory-offer law dates to the mid-1980s; after Northridge in 1994, the CEA took over most residential quake policies in 1996.
How sure?
California Insurance Code Secs. 10081–10089 require the offer; homeowners policy forms list earthquake and earth movement as exclusions.
Watch out for
Why take-up stays near 10% even in quake zones is debated: cost, high deductibles and expectations of federal aid all play a part.
▸Earthquake insurance (California Earthquake Authority) must be bought separately from Landlord & commercial property insurance (loss of rents)Watch out
How they connect
Commercial property policies also exclude earthquake, and the CEA doesn't cover commercial buildings. Owners buy quake coverage separately, often as a 'difference in conditions' policy, with deductibles often 5% or more of building value. Lenders commonly require it when a seismic report's probable maximum loss tops about 20%.
When it applies
Arranged through commercial brokers at purchase or refinance; lenders ordering seismic risk reports drive many of the requirements.
How sure?
Commercial policy forms exclude earth movement; lender guidelines, including CMBS standards, tie quake coverage to seismic probable-maximum-loss studies.
Watch out for
Pricing swings with global reinsurance markets; whether to insure an unencumbered building is purely a risk-tolerance choice.