Should I buy Earthquake Insurance in the LA area?

[Henry Murray]

Hi BP! So I'm looking at buying a duplex in the LA area as a house-hack and I'm wondering what everybody's thoughts are on earthquake insurance?

I have a friend with a couple of small rental properties in the LA area and he doesn't have earthquake insurance on any of them… says it's too expensive and he'd rather take his chances. I also recently talked to a real estate agent who says that her clients (buying $1M+ owner-occupied single-family houses rarely buy earthquake insurance bc they all figure that if something happens it will be so bad FEMA will have to come in and bail us all out anyway.

The way I approach insurance is that I think insurance should be bought for things that I can’t easily replace (ie I don’t buy the missed flight trip insurance from the airlinebut I think that car and homeowner insurance are a necessity bc I’m not in the financial position to just pay my way out if something happens to them or they create a liability). From that mindset it seems a bit irresponsible to not buy earthquake insurance on property in a place that’s known for earthquakes but I also haven't gotten a quote yet to see how expensive it really is. Maybe it is prohibitively expensive, or maybe just nobody has it so we’re all in this under-insured boat together and the federal government will be forced to step in? Or maybe the risk varies significantly depending on exact location so it's kind of a case by case thing, or there are other parts of the story that I’m missing?

If you own property in the LA area, what are your thoughts on earthquake insurance here? Necessity or will we all get bailed out by FEMA? Anyone have any data on what % of properties in the LA area actually have earthquake insurance? Any other parts of the story that I'm missing?

Thanks!