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If you have equity in your home, you have a valuable asset that is worth protecting.  The question is how much is that protection worth? 

In California, whether or not the inevitable earthquake hits, if you have equity in your home, earthquake insurance makes sense.

Let’s say you have paid off your home in California, meaning you have an asset worth approximately $750K.  That asset is likely appreciating over time, so at a conservative 2% annual appreciation, it gains $15,000 in value per year.

For Californians who have owned their homes for 30 years or so, they are living in this home effectively rent-free (property taxes for long-term owners may be $3,000-$4,000 per year).  Consider the loss of this home due to earthquake: that small annual property tax payment would be replaced by rent of 10x to 20x that amount.

In the highest risk earthquake zones, you can generally purchase insurance coverage for under $2,000 per year.  That $2,000 expenditure is about 3% of the property’s annual benefit, and less than 0.3% of its present value – and it protects the $750,000 of built up equity as well as the annual benefits it provides.

Even if that home “only” has $200,000-$300,000 of equity, earthquake insurance is still the smart move.

The only way a Californian loses all their hard work and equity in their largest asset is by not purchasing earthquake insurance.  While saving the modest cost of annual premiums, an owner is putting a very valuable asset at risk of total loss.


Alex Jeffers, Chief Financial Officer, Motus Insurance Services

The likelihood of a major earthquake striking California in the coming decades is significant, bordering on inevitable.  According to U.S. Geological Survey (2015 UCERF3 Report), there is a 94% chance that an earthquake of at least 6.7 magnitude will occur in Southern California in the next 25 years, and a 95% chance that one strikes Northern California over the same timeframe.  If you focus on just the most developed metropolitan areas, the likelihood is still very high: the Los Angeles region has a 60% chance of a 6.7 or greater earthquake, and the Bay Area has a 72% chance.

An additional risk factor for homeowners is the outsized growth of condos as a percentage of total the housing stock, as condos and other multifamily residential structures are far more vulnerable to earthquake damage.  Over the last 25 years, the number of Californians living in multifamily housing has more than doubled, rising from 2.6 million units in 1994 to 5.4 million units today.

Daniel Wallis Orginal retouch 2 (1)
Dan Wallis, President, Motus Insurance Services

In 1994, the Northridge earthquake devastated the San Fernando Valley, causing roughly $20 billion in damage to residential structures alone. Detached homes fared much better than multifamily structures. Although multifamily dwellings accounted for only 22% of the area’s housing, they represented 84% of the damaged properties and nearly 72% of the “red-tagged” homes (homes that were too dangerous to inhabit).  With the increase in condos as a percentage of homes, the number of homeowners at risk has gone up as well.

But due to California insurance regulations, many owners haven’t been eligible to buy earthquake insurance — until now. After seeing the trouble that California condo associations and owners faced, Motus Insurance Services brought together a team of the state’s most respected earthquake insurers and condo insurance specialists to create the Motus Opt-in Master Earthquake Program.

This new direct-to-consumer earthquake insurance program allows all condo owners to fully protect their homes from earthquake damage while taking advantage of the same great rates available for master earthquake insurance policies. Motus is able to bring this solution to consumers because it worked with the California Department of Insurance to remove the barriers that prevented individual owners from buying into the same insurance coverage available to homeowners’ associations, which offers far more comprehensive coverage at significantly reduced rates relative to other individual options available.

“We identified an urgent need in the condo community and worked to design a new insurance product that allows all owners to access the quality coverage and lower prices of a master policy,” said Dan Wallis, CEO and founder of Motus. “Boards benefit too, as the Motus program allows them to fulfill their obligation to consider earthquake insurance. In fact, they are going a step further: They are offering tailored coverage to all owners and doing so without the burden a traditional master policy puts on an association budget.”

Many owners think the Federal Government will step in to provide assistance after a disaster.  To put it simply: the US Government will not step in to save the equity in your home.  Funds distributed through the Federal Emergency Management Administration (loans or grants) are only for health and safety.  After past earthquakes, FEMA has capped individual assistance at $5,000, however that figure has increased to $33,000 after recent flood and windstorm events.  Even at this higher level, government assistance will help an owner find alternative housing or take proactive steps to stop further damage, but it won’t rebuild a lost home, and in most cases, must be paid back over time.

Your personal insurance agent should always be your first stop to better understand your options for protecting your home.  However, if you live in an homeowners association (condo, townhouse, co-op, etc.) you will need to take the additional steps: 

  • Find out if your association has a master earthquake policy from your manager or board (less than 10% of associations have a master earthquake policy)
  • If there is a master earthquake policy how much coverage is there and what it excludes
  • With this information, a unit owner can make an informed decision about what earthquake they will need to supplement the master earthquake policy or fully insurance themselves in the absence of a master earthquake policy.