Earthquake Coverage to a Fault

Most Californians yawn when the subject of earthquakes comes up, but for the worried few there is earthquake insurance. New policyholders paid premiums of about $70 million last year, and public interest is growing. But a recent state report warns that many insurance companies would not be able to pay off all the claims they would face if a quake the size of San Francisco's 1906 calamity (8.3 on the Richter scale) struck again. Losses for a quake of similar proportions, says the report, would reach $5.5 billion in Los Angeles and $3.9 billion in the San Francisco Bay Area.

These estimates may fall far short of reality because they include coverage for structural damage only. Critics of the insurance companies warn that if a serious quake were to strike all major population centers along the California coast, claims could go as high as $50 billion, when payoffs for loss of life, income and automobiles are included.

The companies go on writing earthquake policies anyway because they are enormously profitable. A $100,000 policy costs the homeowner $150 to $200 annually, with a deductible of up to $5,000. Yet payoffs have been minimal. Insurance firms have given out an average of only $700,000 a year on earthquake claims since 1970.