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The chance of a 6.7 magnitude earthquake hitting California in the next 30 years is almost certain — 99.7 percent — according to scientists with the Uniform California Earthquake Rupture Forecast (UCERF). For comparison, the 1994 6.7 magnitude Northridge earthquake in southern California resulted in 57 deaths, nearly 1,200 injuries deaths and more than $40 billion in damage, according to FEMA.

[Visitors from California can get an earthquake insurance quote through our partners here]

The 6.5 magnitude quake that struck near Eureka, Calif., on Jan. 9, 2010, was a reminder of this constant threat. Earthquake damage is generally covered only by earthquake insurance, not by standard renters or home insurance policies.

Yet just 12 percent of Californians who buy residential insurance policies also buy earthquake insurance. Since this number doesn’t take into account people who buy no form of home, renters or condo insurance, the actual percentage is even lower. Those without it face total loss of their homes and all their furniture and other personal belongings. What gives?

Disaster psychology

If you think Californians’ reluctance to buy earthquake insurance is just about high deductibles and premiums, think again. The decision to forgo earthquake insurance has as much to do with psychology and biology as with economics, researchers say.

“Human beings are hardwired to believe in their heart and soul that disasters don’t happen and won’t happen to them,” says Dennis Mileti, a retired University of Colorado sociology professor and noted researcher. “Human beings are not rational when it comes to risk. Rationality is a myth invented by the Italians in the Renaissance.”

According to the latest forecast from scientists at the U.S. Geological Survey, Southern California Earthquake Center and the California Geological Survey, the San Francisco Bay area faces a 63 percent chance of a magnitude 6.7 or greater earthquake, and the Los Angeles region faces a 67 percent chance of a similar earthquake, between now and 2028.

But people perceive risk according to their experiences rather than scientific forecasts. After the 1989 6.9 magnitude Loma Prieta earthquake in the San Francisco Bay area, for instance, state and U.S. Geological Survey officials warned residents they could be in for a strong aftershock within the next 72 hours. Those who suffered a lot of damage did a lot to get ready, Mileti says. Those who suffered a moderate amount of damage did a moderate amount of preparation, and those who suffered no damage did nothing to prepare — regardless of the fact that they were in the danger zone.

“When it comes to human beings, there is no such thing as objective risk,” Mileti says. “There’s only perceived risk.”

The deciding factor of whether Californians buy earthquake insurance has nothing to do with demographics, income, home values or how close they live to an earthquake fault, says Risa Palm, senior vice president for academic affairs and provost for Georgia State University. Palm is a social science researcher who studied Californians’ attitudes about earthquake insurance before and after the Northridge earthquake. “The major predictor is whether they believe they themselves will be affected by an earthquake,” she says.

Palm says that after the Northridge earthquake, Californians who suffered damage were slightly more likely to purchase earthquake insurance, but that tendency faded over time.

Denial: In our genes?

“If you understand evolutionary biology, it gives us some real insight into why we take certain kinds of risks and don’t take certain kinds of risks,” says UCLA evolutionary biology professor Jay Phelan, co-author of Mean Genes: From Sex to Money to Food: Taming Our Primal Instincts.

Our brains developed to handle the risks we faced as small groups of hunters and gatherers and weren’t designed to wrap themselves around concepts such as earthquake risk, a rare event and one that primitive people couldn’t do anything about anyway.

“You’re asking us to solve a problem we’re not built to solve,”Phelan says.

However, he takes issue with the notion that humans are “hardwired” to ignore impending disasters. We may not be designed to understand earthquake risk on a gut level, but we can take steps to override our biology to prepare, he says.

Phelan, who lives in Malibu, has taken steps to prepare for earthquakes but doesn’t have earthquake insurance. He says he can’t afford it, yet if the cost of earthquake insurance was rolled into a mortgage payment, he says he could probably trick himself into thinking he could afford it.

Earthquake insurance: Getting costs down

Earthquake insurance is costly, particularly in high-risk areas. For example, it would cost about $4,300 a year for earthquake insurance for a two-story wood-frame house in the San Francisco Bay area with an insured value of $750,000. That’s with a 10 percent deductible and $25,000 in contents coverage.

The California Earthquake Authority (CEA) provides about 70 percent of the state’s earthquake insurance, which is sold through 16 participating insurers and the California fair plan (the state’s insurer of last resort for those who can’t obtain home insurance in the standard market). The policies include a standard 10 percent or 15 percent deductible; so, for a $400,000 house, a homeowner would have to pay for the first $40,000 to $60,000 in repairs.

The CEA will begin market research next year to probe why consumers don’t buy earthquake insurance and whether a drop in premiums and deductibles would help. The CEA is supporting pending Congressional legislation that would enable it to lower premiums by 30 percent to 40 percent and cut deductibles by half. The proposals would allow the CEA to issue government-backed bonds in case of catastrophic losses that it was unable to cover. Currently the CEA covers that slim risk (about 0.5 percent to 1 percent) with reinsurance, which accounts for 40 percent of its costs, says authority CEO Glenn Pomeroy. If in the small likelihood the authority had to issue bonds, a small premium hike would then repay the bonds.

California earthquake insurance: Everyone’s concern

A lack of earthquake coverage isn’t just California’s problem. With its economy among the top 10 largest in the world, California’s uninsured property losses after an earthquake would send shock waves throughout the country.

Meanwhile, efforts such as the Great California ShakeOut, an annual statewide earthquake drill based on a scenario of a 7.8 magnitude earthquake on the San Andreas Fault, are raising awareness. The chance of a magnitude 7.5 or greater earthquake striking California in the next 30 years is 46 percent.

Mileti now lives in the Coachella Valley, which is crossed by the San Andreas Fault in southern California. He has earthquake insurance and is prepared if disaster strikes. His home is built to the latest earthquake standards, the nonstructural elements in the house are secured and he keeps a stock of emergency supplies, including 50 gallons of water and a small generator. But even Mileti admits he doesn’t instinctively think “the big one” will affect him; he does what he prescribes for others because of his work with state earthquake-prevention efforts and as an advisor to the board of the Southern California Earthquake Center.

“We prefer believing we live on a safe planet, but we don’t,” Mileti says. “We live on a violent planet.”

If you live in California and want to get earthquake insurance, click here.