But very few homeowners are prepared with the necessary insurance, and that can be financially devastating.
And when a powerful and deadly earthquake strikes anywhere in the world, it should be a wake-up call for all of all of us who live in "earthquake country." Unfortunately only 12 percent of homeowners in California have earthquake insurance.
"Many people think, just like Katrina, that the government is going to bail them out," said Pete Moraga from the Insurance Information Network. "But FEMA only provides low-interest loans for homeowners that have damage. So even if you have a mortgage, you are going to have to pay that and the loan as well."
And it doesn't take a quake as large as the one in Japan to cause considerable damage. Remember the 1994 Northridge quake? At a magnitude of 6.7, it caused an estimated $20 billion in damage and not to mention 33 deaths.
After that disaster only one insurance company wrote earthquake insurance, but that's all changed now.
"It's not just one policy like it used to be," said Moraga. "There is a 15 percent deductible. You can also buy a 10 percent deductible. And a lot of people are afraid of that deductible. But keep in mind that the deductible only means that you get deducted from what you get paid."
A lot of homeowners are now wondering if the large payouts by insurance companies in Japan will affect our rates in southern California. And the answer is, quite possibly.
"What you're going to see is a financial rippling effect, kind of like the ripple effect of the tsunami," said Moraga. "And depending on how severe the hit is going to be and the impact is going to be, that will determine whether or not their rates may go up."
There is also the possibility of a tsunami after a major quake in the southern California, and we've seen in Japan how devastating that can be.
However only a very small percentage of Southland homes, and most are on the coast, have flood insurance. And that is the only insurance that covers tsunami damage. Keep in mind it takes 30 days to get it.
