Earthquake Insurance California
78California Earthquake Insurance
The 1994 Northbridge earthquake was the single most expensive earthquake in California's history and shook up the earthquake insurance California industry in a way almost as dramatic as the quake itself.
California Earthquake Insurance in Crises
The Northbridge earthquake not only killed 72 people and injured 9,000, it also led to $20 billion in earthquake damage claims. The result of which was that many Californian insurers either refused to offer, or severely restricted earthquake insurance in California. The lack of insurance mitigation was unacceptable to the California State Legislature which set up the California Earthquake Authority soon after. The issue of water damage in Los Angeles and who pays its very much a current issue.
Earthquake Insurance Calfiornia: The Problem
California Earthquake Authority
The CEA is a quasi-public body which combines private funding and publc administration. Insurance companies can voluntarily be a member of the CEA. California now makes it compulsory for companies offering homeowners' insurance to also include an offer of earthquake insurance. This is generally offered by a policy backed by the California Earthquake Authority. Premiums paid to the insurer are pooled in the CEA to cover claims from homeowners with a CEA policy from one of the member insurers.
There is a fairly large caveat - the State of California does not guaranteed the CEA fund. Claims from a major earthquake could drain the fund. It will also not cover homeowners who insure with non-CEA affiliated insurance companies who subsequently go bust after a major California earthquake.
Earthquake Insurance California - Eligibility
CEA covers the following groups of Californian homeowners and residents:
- homeowners
- mobile home owners
- condo owners
- renters
Except for renters all policy owners are covered for replacement up to the value of their property plus cover for personal contents and living expenses. Renters only get contents and living expense cover.
Earthquake Insurance California - Cover Levels
CEA backed earthquake insurance covers the following:
- replacement or repair of an insured home, condominium, trailer home up to the agreed policy value and in excess of the policy deductible.
- if your home is uninhabitable - additional living costs up to $1,500
- personal property including furniture and personal items up to $5,000
Home owners can also chose to pay extra premiums and:
- lower the deductible from 15% to 10%
- increase the personal property coverage up to $100,000
- increase additional living expenses up to $15,000
- purchase an additional $10,000 in building code upgrade cover
Earthquake Insurance California - Is It For You?
This is a tricky question - the reality is that quite possibly the CEA may be bankrupted by the claims from a major tremor in California. The weakness in the model is that CEA only covers those who live in a high-risk area for earthquakes i.e. California. It would be a much more robust scheme if the scheme was in fact national at Federal level so that the the risk could be spread across the country. The other issue is the exclusion of many items including outbuildings such as detached garages and spa rooms, swimming pools, spas and landscaping - all of which could easily add up to six figure sums.
Whatever you chose carefully weigh your options before you take out earthquake insurance.
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PrintShare it! — Rate it: up down flag this hub
Very interesting hub about California Earthquake Insurance. I live right above California and we always joke that one day a quake is going to cause the state to slide into the ocean. Then a few years ago the geologists determined that we have a fault 20 miles off shore with a history of massive quakes and we are due sometime in the next few centuries. I think earthquake insurance might be a good thing to consider.
@Patty thanks - that means a lot a coming from you - its an interesting topic which I had to research - the last one in the series is more about how we do it in NZ - should publish today!
@agrande - California won't slip into the sea - it is heading north to Canada actually. Yeah the big one is always due so earthquake insurance does have its place for sure
Great hub considering LA just got rocked with two earthquakes in two days. Get the insurance! Thumbs up!
Oh its no coincidence TLS - that's why the whole weekly hubmob topic is on - I couldn't believe that no one had taken this exact url before me :-)
You got it Lissie, perfect title :) and excellent info.
Yo Lissie, thanks for showing the rest of us the way.
I'm impressed that an Aussie can write confidently about California earthquake insurance, or any U.S. insurance at all.
Hi Princessa - couldn't believe the url was still available LOL!
Will - to be honest I had to research it a bit - but it wasn't hard - the information is all out there including academic papers comparing the US to other models
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Patty Inglish, MS says:
6 months ago
This has been very useful, because I knew nothing about Disaster Insurance and Earthquake Insurance until I read your Hubs about them. Thumbs up to each.