Earthquake Insurance in California: Why Most Cerritos Homeowners Don't Have It (And Whether You Should)

California sits on major fault lines. The "Big One" has been predicted for decades. Yet only 13% of California homeowners have earthquake insurance.

Why?

Because earthquake insurance is expensive, comes with high deductibles (typically 10-20% of your dwelling coverage), and most homeowners decide the cost doesn't justify the protection—especially in areas like Cerritos with moderate earthquake risk.

But "most homeowners don't have it" doesn't mean you shouldn't have it. The decision depends on your specific financial situation, risk tolerance, and home's vulnerability.

This guide breaks down everything you need to know about earthquake insurance in California: what it covers, what it costs, how Cerritos compares to higher-risk areas, and how to decide whether it's worth buying.

What Is Earthquake Insurance?

Earthquake insurance is a separate policy (or endorsement) that covers damage to your home caused by earthquakes.

Critical fact: Standard homeowners insurance does NOT cover earthquake damage. If an earthquake destroys your home and you don't have earthquake coverage, your homeowners policy pays $0.

What Earthquake Insurance Covers

✅ Dwelling (your home's structure)

• Foundation damage

• Structural damage to walls, roof, floors

• Attached structures (garage, deck, porch)

✅ Personal property (your belongings)

• Furniture, electronics, clothing

• Usually capped at 50-70% of dwelling coverage

✅ Additional living expenses

• Hotel or temporary housing if your home is uninhabitable

• Meals and other living costs during repairs

✅ Other structures on your property

• Detached garage, shed, fence, pool

What Earthquake Insurance Does NOT Cover

❌ Land damage (sinkholes, landslides, ground settling)

❌ Landscaping (trees, shrubs, lawn damage)

❌ External water or sewer lines (may require separate coverage)

❌ Vehicles (covered under comprehensive auto insurance)

❌ Pools or spas (usually excluded or limited coverage)

❌ Unreinforced masonry (brick chimneys often excluded unless retrofitted)

How Earthquake Insurance Works: Deductibles Explained

This is where earthquake insurance gets expensive and complicated.

Unlike standard homeowners insurance (where deductibles are typically $1,000-$2,500), earthquake insurance deductibles are a percentage of your dwelling coverage—usually 10-20%.

Example:

• Dwelling coverage: $500,000

• Earthquake deductible: 15%

• Your deductible: $75,000

This means if an earthquake causes $100,000 in damage to your home, you pay the first $75,000, and insurance pays $25,000.

If damage is less than $75,000, you get nothing from insurance—you pay the entire cost out-of-pocket.

Why Deductibles Are So High

Earthquake damage is catastrophic and widespread. When a major earthquake hits, thousands of homes are damaged simultaneously. Insurance companies can't afford to pay small claims on every minor crack and broken window.

High deductibles ensure the policy only pays for major structural damage—essentially total loss or near-total loss scenarios.

What Does Earthquake Insurance Cost in California?

Costs vary dramatically based on:

• Location (proximity to fault lines)

• Home age and construction type

• Dwelling coverage amount

• Deductible percentage (higher deductible = lower premium)

Average Costs in Cerritos

Older homes (pre-1980): Add 20-40% to the above costs

Newer homes (post-2000): Subtract 10-20% from the above costs

Comparison: Cerritos vs. High-Risk Areas

San Francisco (high-risk, close to San Andreas Fault):

• $500,000 dwelling with 15% deductible: $2,000-$3,500/year

Los Angeles (high-risk, multiple fault lines):

• $500,000 dwelling with 15% deductible: $1,800-$3,000/year

Cerritos (moderate-risk):

• $500,000 dwelling with 15% deductible: $900-$1,400/year

Bakersfield (lower-risk, inland):

• $500,000 dwelling with 15% deductible: $400-$700/year

Cerritos residents pay less than high-risk zones, but more than low-risk areas.

California's Earthquake Risk: Where Does Cerritos Stand?

Major Fault Lines Near Cerritos:

1. Whittier Fault (closest, ~5-8 miles away)

   • 1987 Whittier Narrows earthquake (magnitude 5.9)

   • Caused significant damage in nearby areas

2. Newport-Inglewood Fault (~10-12 miles away)

   • Runs from Beverly Hills through Long Beach

   • 1933 Long Beach earthquake (magnitude 6.4, 120 deaths)

3. Puente Hills Thrust Fault (~8-10 miles away)

   • Blind thrust fault (doesn't reach surface)

   • Capable of magnitude 7.0+ earthquakes

4. San Andreas Fault (~30-40 miles away)

   • The "Big One" everyone talks about

   • Capable of magnitude 8.0+ earthquakes

Cerritos' earthquake risk profile:

• Moderate probability of experiencing strong shaking (magnitude 6.0-6.9) in next 30 years: ~20-25%

• Low probability of experiencing very strong shaking (magnitude 7.0+): ~5-10%

• Most likely scenario: Moderate damage from nearby fault, or moderate shaking from distant major fault

Historical Earthquakes Affecting Cerritos:

• 1987 Whittier Narrows (5.9): Moderate damage in Cerritos, mostly cosmetic (cracked walls, broken windows)

• 1994 Northridge (6.7): Minor to moderate shaking felt in Cerritos, minimal damage

• 2008 Chino Hills (5.4): Minor shaking, no significant damage

Takeaway: Cerritos has experienced earthquake shaking, but hasn't had catastrophic damage in recent history. However, history is not a guarantee of future outcomes.

Who Should Buy Earthquake Insurance?

You Should Strongly Consider Earthquake Insurance If:

✅ Your home is older (pre-1980) and not retrofitted

Homes built before modern seismic codes are more vulnerable. If your home has:

• Unreinforced foundation (no anchor bolts)

• Cripple wall (short wood-framed wall between foundation and first floor)

• Brick chimney (collapses easily in earthquakes)

...you're at higher risk for serious damage.

✅ You couldn't afford to rebuild without insurance

If an earthquake destroyed your home and insurance doesn't cover it, could you:

• Pay off your mortgage AND rebuild/buy a new home?

• Afford to live elsewhere while rebuilding?

If the answer is no, you need earthquake insurance.

✅ Your mortgage is low or paid off

Paradoxically, homeowners with paid-off homes are prime candidates for earthquake insurance. Why? Because if your home is destroyed and you have no insurance, you're left with:

• A worthless piece of land

• No insurance payout

• No way to rebuild without taking on new debt

At least if you have a mortgage and your home is destroyed, you can walk away from the mortgage (though your credit suffers). But if you own the home outright, you lose your entire investment.

✅ You have significant home equity

If your home is worth $700,000 and you owe $200,000, you have $500,000 in equity at risk. Earthquake insurance protects that equity.

✅ You live in an older home with a high market value

Older homes in desirable areas (like Cerritos) are expensive to buy but potentially vulnerable to earthquakes. If you paid $650,000 for a 1970s home, you'd want to protect that investment.

You Might Not Need Earthquake Insurance If:

❌ You have significant liquid assets and could self-insure

If you have $500,000+ in savings and investments that you could use to rebuild, you might choose to self-insure rather than pay premiums.

The math:

• Annual earthquake insurance premium: $1,200

• Over 20 years: $24,000 (+ investment returns you'd earn on that money)

• If no earthquake occurs in 20 years, you've "saved" $24,000+ by self-insuring

Self-insurance makes sense for wealthy individuals who can absorb a total loss.

❌ You rent

Renters don't need earthquake insurance for the building (that's the landlord's responsibility). However, renters should consider earthquake coverage for personal property (typically $100-$300/year).

❌ Your home value is low relative to replacement cost

If your home is worth $400,000 but would cost $600,000 to rebuild, and you can't afford the high deductible anyway, earthquake insurance may not provide meaningful value.

❌ You're planning to sell within 2-3 years

Earthquake insurance is a long-term risk management tool. If you're selling soon, the premium cost may not be worth it.

Alternatives to Traditional Earthquake Insurance

Option 1: California Earthquake Authority (CEA)

What it is: A state-run earthquake insurance program offering coverage through participating carriers.

Pros:

• Lower premiums than private market (sometimes)

• Standardized coverage across all carriers

• Backed by the state

Cons:

• Limited coverage options (you can't customize)

• High deductibles (10-25%)

• Lower personal property coverage than some private policies

• Caps on additional living expenses

Cost for Cerritos homeowners: Similar to private market, sometimes 10-20% cheaper

How to buy: Through your existing homeowners insurance carrier (if they participate in CEA)

Option 2: Parametric Earthquake Insurance

What it is: A newer type of policy that pays a fixed amount if an earthquake of a certain magnitude occurs within a certain distance of your home—regardless of actual damage.

Example:

• You buy a policy that pays $50,000 if a magnitude 6.0+ earthquake occurs within 15 miles of your home

• An earthquake meets those criteria

• You get $50,000—even if your home has zero damage

Pros:

• No deductible

• Fast payout (within days, not months)

• No need to file a claim or prove damage

• Much cheaper than traditional earthquake insurance ($200-$600/year)

Cons:

• Fixed payout may not cover actual damage

• If earthquake occurs 16 miles away instead of 15, you get $0 (even if your home is destroyed)

• Relatively new product with fewer carriers offering it

Who it's for: Homeowners who want some earthquake protection but can't afford traditional earthquake insurance, or who want to supplement traditional coverage.

Option 3: Earthquake Retrofitting + Self-Insurance

What it is: Strengthening your home to reduce earthquake damage, then self-insuring instead of buying earthquake insurance.

Retrofitting costs:

• Foundation bolting: $2,000-$5,000

• Cripple wall bracing: $3,000-$7,000

• Soft-story retrofit (for multi-story homes): $10,000-$30,000

Benefits:

• Reduces earthquake damage (potentially by 50-80%)

• Increases home value

• May qualify for Earthquake Brace + Bolt grants (California state program that subsidizes retrofitting)

• One-time cost instead of ongoing premiums

Strategy:

• Spend $5,000-$10,000 retrofitting your home

• Self-insure by keeping $50,000-$100,000 in liquid emergency funds

• Save $1,200/year in earthquake insurance premiums

• Over 10 years, you've saved $12,000 in premiums and have a safer home

Who it's for: Homeowners with older homes who can afford the upfront retrofitting cost and want to reduce risk while avoiding ongoing premiums.

How to Reduce Earthquake Insurance Costs

Strategy #1: Increase Your Deductible

Going from 10% to 20% deductible can reduce your premium by 30-40%.

Example:

• 10% deductible: $1,500/year premium, $50,000 deductible

• 20% deductible: $1,000/year premium, $100,000 deductible

• Annual savings: $500

Trade-off: Higher out-of-pocket cost if earthquake occurs, but significant premium savings if it doesn't.

Strategy #2: Retrofit Your Home for Discounts

Many carriers offer 5-20% premium discounts for homes that have been seismically retrofitted:

• Foundation bolting: 5-10% discount

• Cripple wall bracing: 5-10% discount

• Full seismic retrofit: 15-20% discount

Example:

• Pre-retrofit premium: $1,200/year

• Retrofitting cost: $5,000

• Post-retrofit premium with 15% discount: $1,020/year

• Annual savings: $180

• Payback period: 28 years

Retrofitting makes more sense for risk reduction than premium savings alone.

Strategy #3: Bundle with Your Homeowners Insurance

Some carriers offer small discounts (5-10%) for bundling earthquake coverage with your existing homeowners policy.

Strategy #4: Shop Multiple Carriers

Earthquake insurance pricing varies significantly by carrier. Some specialize in earthquake coverage and offer better rates.

At Pinoy General Insurance, we can quote:

• California Earthquake Authority (CEA)

• GeoVera

• Palomar Specialty

• Traditional carriers (Farmers, State Farm, etc.)

Shopping 3-5 carriers can result in 20-40% price differences for identical coverage.

The Financial Decision: Should You Buy It?

Let's run the numbers for a typical Cerritos homeowner:

Scenario:

• Home value: $650,000

• Dwelling coverage needed: $550,000

• Earthquake insurance cost: $1,200/year (15% deductible = $82,500)

• Mortgage remaining: $200,000

Option A: Buy Earthquake Insurance

• Pay $1,200/year

• Over 30 years: $36,000 in premiums (not accounting for investment returns)

• If major earthquake occurs: Home is rebuilt, you pay $82,500 deductible

• If no earthquake: You've spent $36,000 on coverage you didn't use

Option B: Self-Insure

• Save $1,200/year in a dedicated earthquake fund

• Invest it at 5% annual return

• After 30 years: $83,000+ saved

• If major earthquake occurs in year 1: You have $1,200 saved and owe $550,000 to rebuild (catastrophic financial loss)

• If earthquake occurs in year 15: You have $27,000 saved and owe $523,000 to rebuild (still catastrophic)

• If no earthquake in 30 years: You have $83,000+ in savings

Option C: Hybrid Approach

• Retrofit your home ($5,000-$10,000)

• Buy parametric earthquake coverage ($300-$500/year)

• Maintain $50,000 emergency fund

• Total cost over 30 years: $10,000 (retrofit) + $15,000 (parametric coverage) = $25,000

• If major earthquake: Reduced damage from retrofit + $50,000 payout from parametric + $50,000 emergency fund = $100,000 toward repairs

• Risk: If damage exceeds $100,000, you're still exposed

My recommendation for most Cerritos homeowners:

If you cannot afford to lose your home and rebuild from savings, buy traditional earthquake insurance—even with the high deductible. The peace of mind and financial protection justify the cost.

If you have significant assets ($500,000+ liquid) and could rebuild without insurance, consider self-insuring or using a hybrid approach.

How to Buy Earthquake Insurance

Step 1: Get Multiple Quotes

Contact at least 3 sources:

• California Earthquake Authority (through your homeowners carrier)

• Independent agent who represents multiple earthquake insurers

• Direct carriers (GeoVera, Palomar)

Step 2: Compare Coverage and Deductibles

Don't just compare price—compare:

• Deductible percentages

• Personal property coverage limits

• Additional living expense limits

• Exclusions (pools, chimneys, etc.)

Step 3: Consider Your Financial Situation

Ask yourself:

• Can I afford the deductible if an earthquake occurs?

• Can I afford to rebuild without insurance?

• How long am I planning to stay in this home?

Step 4: Decide and Purchase

If you decide to buy, don't delay. Earthquake insurance typically has a 10-30 day waiting period before coverage begins.

Final Thoughts

Earthquake insurance is expensive, has high deductibles, and most people will never use it. But for those who do need it, it's the difference between financial recovery and financial ruin.

The decision isn't easy, and there's no universal right answer. It depends on your risk tolerance, financial situation, and home's vulnerability.

At Pinoy General Insurance, we help Cerritos homeowners evaluate earthquake risk and make informed decisions about coverage. We don't push earthquake insurance on everyone—we help you understand your options and choose what makes sense for your specific situation.

Want to discuss earthquake insurance for your home?

📞 Call: (562) 402-1737
📧 Email: info@pinoygeneralinsurance.com
📍 Visit: 17304 Norwalk Blvd, Cerritos, CA 90703
🌐 Online: pinoygeneralinsurance.com

We'll review your home's earthquake risk, explain your coverage options, and provide quotes from multiple carriers—with no pressure to buy.

Because the "Big One" may or may not happen in our lifetime. But being financially prepared? That should happen today.

About the Author:

Felix Lopez is a licensed insurance agent and business development manager at Pinoy General Insurance Services in Cerritos, California. Since 1993, Pinoy General Insurance has been helping Southern California homeowners evaluate earthquake risk and make informed coverage decisions.