What FEMA covers after an earthquake

Considering skipping earthquake insurance or figuring out your deductible? This guide explains what to expect from the Federal Emergency Management Agency (FEMA) after an earthquake.

Types and Limits of FEMA Grants

  • FEMA offers two types of capped grants: Housing Assistance and Other Needs Assistance, both available via DisasterAssistance.gov.
    • Grants are only available if your area is declared a disaster area by FEMA and not all earthquakes with damage get declared a disaster by FEMA.
    • Grants don’t need to be repaid, but FEMA does audit to ensure funds were used as intended and can claw them back if not.
  • Housing Assistance (maximum of $43,500 in 2024): This helps with home repairs and temporary rental housing .
    • It covers basic repairs to make your home habitable, not to restore it to its original condition. This includes fixing leaks, making the home safe to enter, and repairing driveways or access roads.
    • Important: The maximum covers both repairs and temporary housing. So, if you receive $10,000 for temporary housing, the most you’ll get for repairs is $33,500 ($43,500 – $10,000).
    • There is no income or asset requirement – you can qualify even if your income is high or you have cash on hand.
  • Other Needs Assistance (ONA) (separate $43,500 maximum): This helps with replacing essential items like furniture, appliances, and transportation . It can also help with moving, medical bills, and cleanup.
    • You may need to apply for an SBA loan first – FEMA only gives ONA grants if you don’ t qualify for a loan, unless you need help with moving, medical bills, or cleanup.

Key Points to Remember

  • FEMA grants are not substitutes for earthquake insurance. They often fall short of the actual repair costs.
  • Average payouts are much lower than the maximums. In past earthquakes, homeowners received significantly less than the full grant amount.
  • FEMA doesn’t cover everything. You might still need additional resources like savings, loans, or insurance to fully recover.

What FEMA Pays: Real-World Examples

  • In the 2018 Anchorage earthquake, the average homeowner received only $6,000 in Housing Assistance, leaving many with substantial remaining repair costs.
    • That’s based on reports FEMA provided around $26 million worth of Housing Assistance grants to 4,333 households impacted by the Anchorage earthquake.
    • Some were left with hundreds of thousands of dollars in damage even in homes that remained standing. 
    • One couple with $300,000 in damage received only $2,000 in grants and a $200,000 loan, and looked to GoFundMe for assistance..  
    • 1,772 residents had to rely on $70 million worth of SBA disaster loans to recover from the earthquake, an average $39,500 per loan. This is beyond any grant assistance received, and must be repaid like a mortgage. 
  • Similarly, the average grant in the 2020 Salt Lake City earthquake was just $1,121.
    • 956 households received $1,071,789 in grants, an average of $1,121.
    • 89 had to turn to SBA loans and received an average of $26,133.

Applying for FEMA Assistance

  • Emergency rental assistance is usually the fastest payout. It can be available within a day to cover temporary housing or cleanup costs.
  • Larger payouts for repairs require additional steps:
    • An on-site assessment by FEMA.
    • Proof of submitting an insurance claim, even if you don’t have earthquake coverage.
    • This process can take a significant amount of time.

Additional Points:

  • FEMA grant eligibility is open to any U.S. citizen in a declared disaster area, regardless of income or assets.
  • FEMA audits and may claw back grant funds used for anything other than the stated needs.
  • It is rare that FEMA covers the full grant amount, and even in situations where hidden structural damage was present, local intervention may be necessary to secure additional funds.
  • While FEMA covers basic repairs, these may not be enough to fully restore a home to its original state.

SBA Loans as an Option

  • The Small Business Administration (SBA) offers disaster loans:
    • Up to $500,000 for repairs.
    • Up to $100,000 for replacing personal belongings.
  • For people with the income, assets, and credit to qualify for private market loans, the SBA loan rate is similar to current mortgage rates, or a little bit less. In more detail, the rate is chosen from either  1) the prevailing market mortgage rate for the term of the loan, as determined by the SBA, or 2) the Treasury bond rate for the term of the loan, plus 1%. The lower rate applies. 
  • For people whose income and assets don’t qualify them for private market loans, SBA loan rates are reduced by 50% versus typical mortgage rates. Rates were 2.35% for those who needed assistance in early 2023 versus 4.75% for those who didn’t.
  • The loans can be used to cover the gap created by insurance deductibles. So if you have a home insured for $800,000 with $200,000 in damage and a 10% deductible ($80,000) you can take out an $80,000 SBA loan to handle the gap.
  • You can use both FEMA grants and SBA loans to help recover
  • SBA loans can be used to relocate voluntarily if you stay in the same municipality as your current home. Exceptions to move elsewhere might be granted if you:
    • Lose a job or can’t find work in your area
    • Have medical considerations that don’t let you stay
    • Have special family circumstances that require you to move
    • Live in an area with demonstrable risk of more disasters
  • Secondary and vacation homes don’t qualify for FEMA or SBA assistance

Remember: FEMA and SBA assistance is a limited safety net, not a complete solution for earthquake recovery, but they can help complement your other resources like quake insurance.

Keeping in mind the cost you can expect to repair is useful in weighing how much to lean on one area of support versus another.

We’ve found U.C. Berkeley research that simulated several major quake scenarios in California and had insurance adjusters estimate the repair cost for a typical home. We used it to derive a repair estimate of $50,000 for minor structural damage to over $700,000 for major damage to a 2,500 square foot home in California.

Consider this scenario…

  • Quake damage rebuilding cost: $500,000 (significant damage, but not total destruction)
  • Mortgage: $600,000
  • Dwelling insured value: $800,000 (what it costs to rebuild a completely destroyed home)
  • Land value: $700,000 (what you could get for selling the damaged or demolished property)
  • Price to buy an identical undamaged home: $1,000,000 (this is typically less than land value plus rebuilding cost since most homes aren’t brand new and have some depreciation from wear and tear)

Without insurance a possible ‘good’ scenario with federal assistance would be…

  • A $43,500 FEMA grant
  • A $456,500 SBA loan with a payment of $2,790 a month at 6% over 30 years, or a smaller loan if you use your savings or decide to save by cutting back on the budget of your rebuilding. This is on top of the $600,000 mortgage you already have.

You could instead use the SBA loan proceeds to sell and relocate elsewhere, but you’d only have about $556,500 to work with after paying off your mortgage:

$700,000 land value proceeds

+ $456,500 SBA loan proceeds

less $600,000 mortgage to pay off

= $556,500 to use toward another home vs $1,000,000 cost to buy a similar home.

SBA loans often force you to stay in your area. They generally can’t be used to relocate outside your existing city unless you lose a job, have a medical or family circumstance, or there’s a demonstrable risk of more disasters in your area.

With $800,000 in earthquake insurance, a 10% deductible ($80,000) and $500,000 in damage you could able to stay in your location and rebuild with…

  • A $43,500 FEMA grant
  • A $36,500 SBA loan with a payment of $218 a month at 6% over 30 years
  • $420,000 in insurance payments

Deductibles don’t need to be paid out of pocket to the insurer so you might choose to forgo the SBA loan if you don’t want the modest extra monthly payment and reduce the budget of your rebuild.

You could also use the insurance proceeds to relocate anywhere you’d like with no municipality restrictions, though you’d still be stuck with paying off your existing mortgage with the proceeds of selling your parcel.

Earthquake insurance might cost less than you think, and our free quake insurance calculator lets you get an estimate without providing your email or phone number.