Despite living in the state with the greatest risk of earthquake, the number of California homeowners with coverage against such an event has decreased from 30 percent in 1996 to about 12 percent today, the Insurance Information Institute reported.

“Our sense is that the passage of time has created a situation where people don't see the need,” according to Mike Barry, a spokesman for Institute. “It has been 14 years since the last big California earthquake.”

The 1994 Northridge earthquake and the 1989 quake that struck the Oakland-San Francisco area are the two most costly earthquake events in U.S. history, as defined by insured losses, the Institute said.

In 2007 dollars, Northridge caused about $20 billion in insured losses, while the Oakland-San Francisco event resulted in insured losses totaling almost $12 billion, according to I.I.I. figures.

The Institute said the earthquake in China last week, which has killed more than 40,000 people, offered a reminder of the risk of a severe earthquake striking the United States, and urged people to buy insurance protection against quakes.

Bob Stewart, operations manager at the California Earthquake Authority, said there is a two-week lag in the way the data is transmitted by CEA's participating insurers, so there are no figures available to indicate whether the China event has provoked additional homeowners in his state to buy the coverage.

Normally, he said, “insurers contact me if there's a significant increase, but I've heard nothing at this time.”

The low take-up rate is despite the fact that unlike flood insurance, earthquake coverage is available from private insurance companies. In California, carriers are part of the CEA program–a privately-funded, publicly-managed organization.

About 5,000 quakes strike the United States each year. Since 1900, earthquakes have occurred in 39 states and have caused damage in all 50. Already in 2008, earthquakes have struck states such as Illinois and Nevada, the Institute noted.

The Institute said California remains the state most at risk of a major earthquake.

It noted that according to an April 2008 study released by experts from the U.S. Geological Survey, USC's Southern California Earthquake Center and the State Geological Survey, a huge quake is far more likely in southern California than in Northern California over the next 30 years.

That report also concluded that California is virtually certain to be hit by a major earthquake by 2028. The researchers found that the chance of a 6.7 magnitude temblor, equal to the 1994 Northridge quake, is 97 percent in Southern California and 93 percent in Northern California.

The likelihood of a 7.5 quake, which is 16 times more intense than a 6.7 quake, is 37 percent in Southern California and 15 percent in Northern California.

The study used new information about prehistoric earthquakes, locations of faults and their slip rates, and satellite data of the movement of the Earth's crust to calculate the likelihood of earthquakes in the state.

The Institute said the potential cost of earthquakes has been growing because of increasing urban development in seismically active areas, as well as the vulnerability of older buildings, which may not have been built or upgraded to current building codes.

Earthquake insurance often carries a deductible–generally in the form of a percentage rather than a dollar amount. Deductibles can range anywhere from 2 percent to 20 percent of the structure's replacement value.

This means that if it costs $100,000 to rebuild a home and the policy had a 2 percent deductible, the policyholder would be responsible for paying the first $2,000.

The CEA offers homeowners dwelling coverage deductibles of either 10- or 15 percent. The CEA coverage limit is the insured value of a home as stated on a companion homeowners insurance policy.

The Institute said earthquake insurance premium rates are determined differently by each insurance company, and can vary widely depending on age, materials and structural soundness.

Special Reports /

Fewer Quake Insurance Takers In California

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