Deciding whether or not to buy earthquake insurance is a dilemma for California homeowners, but it’s doubly difficult for condominium and town home owners.

Condo dwellers can buy quake insurance that covers the interior of their unit and certain other expenses.

Homeowners associations can buy insurance that covers the building and other common areas, but nothing inside units. To be fully protected, a unit owner needs both.

If unit owners buy coverage for themselves, but the HOA has not purchased it for the building and it is destroyed, the owners might have nothing to come home to.

"This is an Achilles’ heel," says Darcy Herberick, a condo owner in Alameda.

Herberick pays $1,030 a year for a California Earthquake Authority policy that covers her unit. But her complex has no quake insurance and she wonders if she is wasting that money.

"What is the reality of rebuilding after an earthquake given the fact that the overall structure is not covered?" she says. "I regret buying in a liquefaction zone. I have no way of covering myself."

Doug Heller, executive director of Consumer Watchdog, says the government and groups such as his focus on single-family homes and that "condo owners have been the neglected community when it comes to earthquake insurance."

HOAs are required to buy fire and liability insurance for buildings but do not have to buy quake insurance. That decision is usually left up to the board, but if the cost would raise HOA dues by more than 20 percent, it must be approved by a majority of homeowners. The vote is often contentious.

"I get complaints from both sides," says Marjorie Murray, a policy analyst with the Center for California Homeowner Association Law. "Some people complain that their association won’t buy it. Some say they went ahead and bought it and now we have these huge special assessments."

Richard Munson, president of the California Association of Homeowners Associations, doesn’t have figures but says most HOAs do not buy quake insurance. "The cost is out of reach for most homeowners associations. Not only is the premium high, the deductible is also high."

In California, if a company sells homeowners insurance to condo-unit owners, it must offer them quake coverage.

However, if a company sells commercial fire and liability insurance to condo complexes called a master policy, it does not have to offer quake insurance along with it.

State Farm sells master policies but stopped offering quake coverage to new HOA clients in the late 1990s. It continued selling quake insurance to some existing HOA clients but is no longer renewing some of them, especially those with parking garages on the ground floor, says Dennis Hagerty, a State Farm agent in Novato. State Farm continues to offer state earthquake policies on individual units.

The Ugly Relative

Raymond Laherrere, president of First Equity Property Management Co. in San Mateo, says that roughly half of the 23 complexes his firm manages on the Peninsula have quake insurance.

"As a rule of thumb, it doubles the cost of insurance," he says. "It’s like an ugly relative. People kind of like it, but it’s painful." Prices can vary drastically from year to year, and companies usually demand a full year’s premium up front. Most companies won’t insure the full replacement cost of a complex for quake damage.

His firm recently secured a quake policy for a 138-unit townhome complex in Foster City called Marina Green. "The net worth of the complex is $30 million. We got $5 million worth of quake coverage for $55,000 a year, he says.

His firm also got $5 million worth of coverage on Sand Hill Circle, a 98-unit townhome complex in Menlo Park, for about $48,000 a year. "Three years ago it was $90,000," he says.

Laherrere says it usually costs more to insure condos than townhomes because condos often have parking on the ground floor and insurers "hate that."

Joe deLucchi, a business insurance broker with CAL Insurance & Associates in San Francisco, says the price varies widely depending on location and soil conditions. "If you are on landfill in the Marina or Alameda, you are going to have a very difficult time finding quake insurance for your HOA," he says.

Rather than buy quake insurance, the Woodlake condominiums in San Mateo put $50,000 a month into an earthquake fund to retrofit common areas, says Sue Lambert, general manager of the Woodlake Association. Even with the retrofit, "we continue to investigate earthquake insurance each year," she adds.

Statewide, roughly 12 percent of homeowners have earthquake insurance, according to the California Department of Insurance. Bruce Patton, the department’s senior staff counsel, says the department doesn’t know what percentage of condo complexes or units have coverage, but he assumes it is 12 percent or less.

He says the department is concerned about condo owners who can’t fully protect themselves because their HOA doesn’t have coverage.

"In the past, there was a request that pending legislation be amended to require expanded earthquake coverage for condominiums," Patton says. "The problem is getting enough insurance capacity to cover that. The homeowners associations "would love CEA to offer broader coverage. The CEA feels it couldn’t get reinsurance at a reasonable price to cover it."

Insuring Your Unit

Heller says condo owners should urge their HOAs to get quake insurance. "There’s a good chance that if the whole building goes down and it’s uninsured, it’s going to be very difficult to rebuild. All the owners will have to put in incredible amounts of money. People are probably not equipped to do that," he says.

If the HOA won’t get insurance, should unit owners still buy their own? Heller thinks they should "at least insure their contents" or "they could walk away with nothing."

The CEA condominium-owners policy offers four types of coverage:

— Building property. After a $3,750 deductible, this covers up to $25,000 in damage to interior property such as flooring and built-in appliances.

— Personal property. You can choose $5,000 to $100,000 worth of coverage to replace furniture, electronics and other belongings. The deductible for all coverage limits is $750.

— Loss of use. This covers increases in your living expenses if you have to move out. The limit ranges from $1,500 to $15,000 with no deductible.

— Loss assessment. After a quake, your HOA might assess members to pay for repairs or, if it has insurance, its deductible. This coverage pays for assessments that you are legally obligated to pay and that result from losses to your building but not other structures such as pools or clubhouses. The coverage limit ranges from $25,000 to $75,000 after a 15 percent deductible.

What if you buy this coverage and your building is destroyed but there is no assessment because it’s not rebuilt?

A second component of loss assessment coverage, called "Reduction In Value Of Your Ownership Interest," will compensate the policyholders up to their loss assessment limit for any reduction in the value of condominium interest attributable to the non-repair or non-replacement of covered property, says Chris Nance, a spokesman for the earthquake authority. Nance believes this feature is unique to CEA policies.

You can purchase one or more types of coverage although the personal property and loss of use must be purchased together.

Condo owners can estimate their CEA premium at: links.sfgate.com/ZJQY.

In many parts of the Bay Area, a person who bought all four types of coverage at the maximum limits would pay up to $1,272 per year.