Standard homeowners insurance policies do not cover earthquake damage. In most of the country, lenders do not require earthquake insurance because the seismic risk is low. In high-risk zones such as coastal California, the Pacific Northwest, and the New Madrid Seismic Zone in the central United States, some lenders impose an earthquake insurance requirement as a condition of loan approval.
FEMA Seismic Hazard Classification
- ✦Highest risk: coastal California including the San Francisco Bay Area, Los Angeles, and parts of Nevada and Idaho
- ✦High risk: northern California interior, Pacific Northwest, and western Montana
- ✦Moderate risk: New Madrid zone covering parts of Missouri, Arkansas, Tennessee, Illinois, Kentucky, and Mississippi
- ✦Low risk: most of the eastern United States
California Earthquake Authority
The California Earthquake Authority (CEA) is the primary market for residential earthquake insurance in California. Policies are distributed through admitted carriers and cover the dwelling structure, personal property, and additional living expenses. CEA dwelling deductibles are typically 10% to 25% of the insured value. On a $750,000 insured home with a 15% deductible, the homeowner covers the first $112,500 of quake damage before the policy pays.
When Lenders Actually Require It
Most conforming lenders following Fannie Mae and Freddie Mac guidelines do not require earthquake insurance even in seismic Zone 4 in California. Some portfolio lenders and jumbo lenders in the highest risk zones impose the requirement as a property-specific overlay. Check the lender's hazard insurance overlay sheet when originating jumbo loans in Zone 3 or Zone 4 states. If required, verify the policy is bound and in force before scheduling the closing.
Aria can look up hazard and earthquake insurance requirements for specific loan programs and property types. Ask at vicariointel.com.
7-day free trial. No credit card required.
Ask Aria About Earthquake and Hazard Insurance Requirements →