As I see it, you have 3 choices:

1. Pay the $10k+ annual premium and if the earthquake destroys the house, pay the $450K deductible;

2. Continue without earthquake insurance and if the earthquake destroys the house, pay out the entire cost of rebuilding a $3 million house;

3. Move.

If you own a $3 million home, with no mortgage, in a nice zip code in CA, you ought to be able to absorb a $450K hit (heck, you could finance it on a 15 yr mortgage).

I would pay for the insurance and be thankful I was wealthy enough to own a $3 million home.

If you've been in the house for awhile, I suspect your home has appreciated a lot in the last few years of run-ups in home prices. In conjunction with that value appreciation, your property taxes have also gone up considerably too. Unless you're fotunate enough to still have caps on rising property taxes through Prop 13, your property taxes are $10K a year or more. Do you refuse to pay property taxes because they are so high? No, of course not, because you don't have a choice -- the state would take your house away.

What if an earthquake takes your house away? If one chooses not to insure a $3 million home against severe earthquake damage, one surely has a Plan B? If the worst happens, what is your Plan B, what do you plan to do?

On the other hand, possibly you are asset-rich and cash-poor and can't afford the high annual premium -- but do you want to end up asset-poor AND cash-poor?

Like I said, if it were I, I would pay the steep annual premium (just like my steep property taxes) and sleep well at night. If I couldn't afford to do that, I would move to a cheaper house and/or a place that was less seismically active.

With 85% of California homeowners uninsured for earthquake damage, I figure there are a lot of people who don't have a Plan B or they think their Plan B is the government.

Your situation reminds me of an elderly woman I read about a few years ago. She owned a home -- paid for -- on Lake Tahoe, right on the lake front. Her property taxes had gone through the roof as the land values escalated. She complained that she couldn't afford the taxes and that she and her late husband had owned that house and land for years and what was she to do?

It all boils down to the same thing -- tough choices have to be made -- maybe not today, but someday, sooner or later.

Personally, I hope you don't get hit by an earthquake if you continue to live there without insurance. I truly do not wish that on anyone. Truth is though, there are a lot of people in California in your same situation and someone's -- a lot of someones -- number is going to come up. It's just a matter of time.

Barbara