US Economy

Californians are in the quake zone—and uninsured

Aftershocks rock California
VIDEO2:4502:45
Aftershocks rock California

As residents in La Habra, Brea and Fullerton pick up the pieces—-literally—from Friday night's 5.1 earthquake in Southern California, most will have to pay for the damage themselves.

That's even if they have earthquake insurance. And, as it turns out, most of them do not.

Employee Paula Anania cleans up hair care products that were knocked off the shelf in a beauty supply store in the Encino area of Los Angeles after a 4.4 earthquake jolted the area March 17, 2014.
Robyn Beck | AFP | Getty Images

Earthquake damage is not covered by a regular homeowner's policy. Earthquake policies carry high deductibles—at least 10 percent of a home"s value. Often, policies do not cover more than a few thousand dollars for furniture, dishes, electronics and other contents destroyed in a quake. Premiums are expensive.

As a result, nearly 90 percent of homeowners in the Golden State do not have quake insurance, according to the California Earthquake Authority.

Read MoreAftershocks rattle California following 5.1 quake

The California Earthquake Authority was set up after the 1994 Northridge quake. At that time, 40 percent of homeowners had earthquake insurance, but most companies stopped writing earthquake policies in California after being hit with a reported $12.5 billion in claims.

At first, the CEA offered only policies with a 15 percent deductible and $5,000 worth of personal property coverage. Few people signed up. The CEA has since provided more coverage options, including up to $100,000 in personal property coverage, but that comes with even higher premiums.

Read MoreFormer Pimco pro 'worried' about high-speed trading

As a result, most people are opting out of quake insurance, not willing to spend a lot of money year after year to protect against the small possibility that when a quake hits, their homes will be destroyed. After all, the federal government could step in after a disaster, though Federal Emergency Management Agency loans have to be repaid. Many homeowners in the Northridge quake simply walked away from damaged houses and left them for the bank. That also damages homeowners' credit ratings.

Those sobering possibilities and a recent swarm of quakes may now have some residents rethinking their aversion to insurance: The day after the recent 4.4 earthquake in Encino, in the heart of the San Fernando Valley, the state's earthquake authority said traffic to its website more than doubled.

Berkshire Hathaway Live Event