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Reducing the costs of earthquakes in California

Earthquakes are California’s costliest disasters (see graph of disaster costs). They have produced over $60 billion in losses in California since 1971. These losses include building and bridge damage, destruction of building contents and business interruption. Understanding where future damage is likely to occur can help us take actions now to reduce potential losses and assist in our recovery.

Earthquakes are California's costliest disasters. This chart shows losses from several disasters since 1971, compared using 2003 dollars.

Damage caused by an earthquake depends on the pattern of intense shaking, how many structures are in the area, the quality of construction, and many other factors. If an earthquake the size of the magnitude 6.7 Northridge earthquake were to occur in a more densely populated area with older buildings, fatalities and damage would be much higher.

California's enhanced building codes, strengthened highway structures, and emergency management organizations have reduced the deaths, injuries and damage in recent earthquakes. However, to reduce losses in future earthquakes much more work is needed. Older buildings at risk from earthquakes must be strengthened or rebuilt, emergency managers must be equipped and ready to respond, and individuals must take responsibility for their safety and the protection of their property. Better building codes only apply to new construction, so in most cases it is up to you to strengthen your building by a seismic retrofit.

Understanding your potential earthquake risk

You are at risk for a loss if you own property in earthquake country. If you ask the right questions about your risks and take steps to prepare and protect yourself, you may be able to reduce your risk. This can limit the damage earthquakes may cause to your home and belongings. Here are some factors to consider:

  • Consider the geographic location of your property in relationship to identified and active earthquake faults or areas that can have liquefaction or landslides. (See Earthquake-related Hazards )
  • Know what type of soil your home is built on, and what risks the soil type might bring in the event of an earthquake. (See Earthquake Shaking )
  • Are your belongings properly secured? (See Step 1 )
  • Consider the age and type of construction of your home. Do you have a raised foundation with a cripple wall, or is your home resting on a slab foundation? Learn what retrofitting programs are available and how they might benefit your property. (See Step 4 )
  • Consider the investment you have in your property, including your belongings. How much equity do you have in your property? If a devastating earthquake destroyed your property, how would you recover and rebuild?

Individuals interested in estimating the

potential losses to their home can follow the guidance suggested in Understanding Your Risk–Identifying Hazards and Estimating Losses available from FEMA.

Annualized earthquake loss ratios at the county level

To understand potential losses from future disasters, the Federal Emergency Management Agency (FEMA) developed a software program called HAZUS. This program combines information about expected shaking, building types and locations, population and other factors to calculate the severity of damage that an earthquake may cause and resulting costs and allows officials to estimate the impacts of an earthquake without having to wait for it to occur. This map shows expected losses each year for counties in the United States, averaged over many years. Los Angeles County has the highest expected loss of any county in the country, at over $1 billion each year on average. In addition, the Southern California region contains almost half the Nations $4.4 billion in projected annualized loss.

Earthquake insurance in California

If you own your home it is probably your single biggest asset. You have worked hard to secure your piece of the American Dream by becoming a homeowner. In seconds, your dream can become a nightmare when an earthquake strikes and damages your home and personal belongings. Even if you follow the steps in this handbook, it is likely your home will still have some level of damage, and you will need to repair or replace belongings. One option for managing these potential costs is to purchase earthquake insurance.

Earthquake insurance in California is typically not part of your homeowners insurance policy; it is generally a separate policy you can purchase when buying homeowners insurance. All insurance companies that sell residential property insurance in California are required by law to offer earthquake insurance to homeowners when the policy is first sold and then every two years thereafter.

The cost of the earthquake policy you are offered is based on a number of factors, including your home's location, age, construction type, and value. It is up to each homeowner to consider their individual risk factors and weigh the cost of earthquake coverage against the benefits that coverage may offer in the event of a devastating earthquake.

Many companies issue California Earthquake Authority (CEA) insurance policies, which are designed to rebuild your home if it suffers significant damage from an earthquake.

You may purchase a CEA policy only through the CEA's participating insurers. A complete list is on the CEA web site at which has an online premium calculator.

Contact your homeowners insurance company or agent to help you evaluate your earthquake risk factors and then consider whether earthquake insurance is a good choice for you.

Category: Insurance

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