I think you're substantially correct that most people don't recognize the risk, but you've actually got the situation backwards: The last thing you want to do

I think you're substantially correct that most people don't recognize the risk, but you've actually got the situation backwards: The last thing you want to do in CA is own your house or have a mostly paid-off mortgage. Earthquake insurance is crazy for all the reasons you mention (and more), but at the end of the day your non-recourse mortgage is your insurance: if your property is destroyed you can simply walk away. Edit: I guess I should clarify that walking away from hundreds of thousands of dollars of "home equity" should hurt almost anyone. My point is simply that this protection is built into your mortgage, and is available on dramatically better terms than actual earthquake insurance, which in CA would likely be unable to pay out in the event of "the big one" anyway.