Earthquake Insurance, Not Always the Best Option.
We urge you to compare the costs of a retrofit versus insurance. More than likely you need a no cripple wall retrofit or a cripple wall retrofit. Both of these retrofits are extremely effective. The cost of repairing a retrofitted house will often be less than the deductible on your expensive earthquake insurance policy. All the evidence shows that you and your retrofitted house should more or less be fine.
The California Earthquake Authority (CEA) is a privately financed, publicly managed non-profit which provides homeowner earthquake insurance policies. These policies are issued through participating private insurers. Two thirds of residential earthquake insurance policies for California homes are issued via the CEA. As of 2025, the CEA website’s Financial Strength page reports $19 billion in claim-paying capacity. Even the CEA know they will minimize their expose to loss if clients retrofit their homes. This is why they started the Brace And Bolt Program.
However, the amount of damage from a large earthquake on the Hayward Fault is forecast to be $165 billion, far more than the CEA will be able to pay. If the expected large earthquake occurs in Los Angeles, $200 billion dollars of damage to homes is expected. Obviously, the CEA fund is inadequate to meet major quake claims in either the Bay Area or Los Angeles. And they are not obligated to – see page 3, section 4 of this sample policy. And what if a catastrophic quake decimates both cities?
Earthquake insurance and retrofits are not mutually exclusive. If you want to be prepared for the very worst scenario you might want to do both. But if you have to choose one, remember that you pay for a retrofit only once. The cost of a retrofit usually has a payback of 4-6 years and will serve to protect you far more than an insurance policy.
More importantly, a seismic retrofit allows you to avoid the most serious consequences of the disaster altogether in most cases. Instead of dealing with a life-disrupting catastrophe, minor repairs are only an inconvenience. In short, a seismic retrofit can protect your home, your finances, and your health.
Earthquake Insurance vs Retrofitting
Three factors to consider:
Safety
Earthquake insurance will not protect you from harm. Earthquakes can kill or seriously injure people, especially in soft story, hillside, or other especially vulnerable homes. A retrofit could save your life; earthquake insurance cannot.
Stress
Bodily injury and/or losing a home creates extreme stress. This makes getting your house and life back to normal difficult and time consuming. Besides Red Cross shelters, temporary housing alone will be difficult to find and cost a fortune. You will probably need to leave the area and stay with relatives.
Financial loss
Temporary housing costs and loss of work can add up. Structural earthquake damage to a home can be considerable, even devastating, and very expensive to repair. In addition, is that finding a contractor will be difficult, due to high demand. Cost may triple or more, along with wait to start repairs.
Your insurance claim may not be collectible
In the event San Andreas and Hayward Fault earthquakes happen more or less at the same time, then what? As discussed above, funds in reserve for earthquake insurance claims are grossly inadequate to meet the demands of a major earthquake.
Here’s a clause from a sample policy on the CEA website (page 3):
4. Pro-rata or Installment Claims Payments. In accordance with California Insurance Code section 10089.35, if at any time the California Earthquake Authority Governing Board determines that the CEA’s available capital may be exhausted and that no additional funds (from specified sources) will be available to the CEA to pay policyholder claims, the CEA may pay claims on a pro-rata basis or in installment payments, based on a plan presented to the California Insurance Commissioner. If this occurs, you might not be paid the full amount of your claim or your claim might be paid in installments, or both. Under no circumstances will the State of California be responsible for the payment of your claim.
