Haris Ashley
Earthquakes are a constant threat in California, with the state's location on the San Andreas Fault making it particularly vulnerable. Despite this, only about 10-13% of California homeowners have earthquake insurance, with many assuming that earthquake damage is covered by their standard homeowners insurance. However, earthquake damage is typically excluded from homeowners insurance policies, and a separate earthquake insurance policy is required to protect against financial losses in the event of a major earthquake. The California Earthquake Authority (CEA) is the primary provider of earthquake insurance in the state, offering policies for homeowners, mobile home owners, condo unit owners, and renters. While some may be hesitant to purchase earthquake insurance due to the cost, it can provide crucial financial protection in the event of a devastating earthquake.
| Characteristics | Values |
|---|---|
| Earthquake insurance coverage in Southern California | 13% of California homeowners have earthquake insurance, according to California Earthquake Authority CEO Glenn Pomeroy. Other sources state that the figure could be as low as 10% or as high as 20%. |
| Reasons for low coverage | People don't think earthquakes will happen to them, concerns about cost, and the belief that the government will provide assistance or that their homeowner's insurance covers earthquakes. |
| Earthquake insurance providers in Southern California | The California Earthquake Authority (CEA) provides most earthquake insurance in California. |
| How to obtain CEA earthquake insurance | You cannot buy earthquake insurance directly from CEA. You must purchase it from insurance companies that are members of CEA. You must have a residential property insurance policy in place to get a CEA earthquake policy, and you must purchase your CEA policy from the same insurance company that you have your residential policy with. |
| Discounts | Older homes may qualify for a discount of up to 25% if they have been properly retrofitted. |
| Exclusions | Common exclusions in earthquake insurance policies include anything that your homeowners policy already covers, such as fire damage. |
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What You'll Learn
California Earthquake Authority (CEA)
The California Earthquake Authority (CEA) is a publicly managed, privately funded, not-for-profit organization that provides residential earthquake insurance to Californians. It was created by the California Legislature in 1996, following the 1994 Northridge earthquake, which damaged or destroyed thousands of homes. The CEA works with participating residential insurance companies to offer earthquake insurance policies to homeowners, mobile home owners, condo-unit owners, and renters.
The CEA offers expanded coverage choices and deductible options to help Californians find a policy that meets their needs and budget. The cost of a CEA policy depends on factors such as the location of the home, the cost to rebuild, the type of construction, the coverages selected, and the deductible. The CEA's policies cover structures such as bulkheads, piers, retaining walls, and masonry fences, provided they are integral to the stability of the dwelling.
The CEA Homeowners Choice policy allows separate coverage for dwellings and personal property, with different deductibles. However, both deductibles will not be applied to the same earthquake claim. This means that if the covered damage to the house exceeds the dwelling deductible, the CEA waives the personal property deductible.
The CEA also provides a $10,000 building code upgrade coverage with every homeowner policy, helping with the added costs of rebuilding to current building-code standards. Older homes that have been properly retrofitted to better withstand earthquakes may qualify for a discount of up to 25% on their CEA insurance premium.
To purchase a CEA policy, individuals must contact a participating residential insurer, as the CEA does not offer stand-alone policies. The CEA website provides resources for earthquake preparedness, such as creating a safety plan and putting together a disaster safety kit.
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Discounts and exclusions
Earthquake insurance is not mandatory in California, but it is a good idea to have it as damage from earthquakes is excluded from standard home insurance policies. Most earthquake insurance in California is provided by the California Earthquake Authority (CEA).
Discounts
If you own an older home that has been retrofitted to withstand earthquake damage, you could qualify for a discount on your CEA insurance of up to 25%. The discount depends on the age of the home and type of foundation. A seismic retrofit involves strengthening your home's foundation to make it more resistant to shaking.
Exclusions
Earthquake insurance does not cover anything that your homeowners' policy already covers. For example, your homeowners' policy covers fire damage, even if an earthquake causes the fire, so your earthquake policy will not cover fire damage. Earthquake insurance also does not cover:
- Damage to your land, such as sinkholes from erosion or other hidden openings under your land
- Damage to your vehicles
- Water damage from outside your home, such as sewer or drain backup, flood, or tsunami
- Certain types of problems that occur right before, during, or after an earthquake, such as fire or earth movement from a non-seismic event
- Water supply systems, such as wells, irrigation systems, sprinkler systems, and water reclamation systems
- Underground structures or equipment outside the foundation wall of the dwelling, such as underground pipes, cables, flues, and drains
- Decorative items or works of art, such as murals, sculptures, fountains, aquariums, stained or leaded glass, mirrors, and chandeliers
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Separate policies
Earthquake insurance is not included in standard homeowners, renters, or condo insurance policies. In California, a separate policy is needed to protect your home and recover from the effects of a major earthquake. The California Earthquake Authority (CEA) provides most earthquake insurance in California.
The CEA Homeowners Choice policy offers the option of choosing separate coverage for dwellings and personal property, with different deductibles. You can purchase coverage for your house alone or with other coverages. Policy choices include earthquake damage to your house and attached structures like your garage. Deductibles available are 5%, 10%, 15%, 20%, or 25%.
A few companies offer policies that you can buy without purchasing homeowners insurance from the same company. Your premium depends on several factors, such as the location of your home, the cost to rebuild, the type of construction, the coverages selected, and the deductible.
Older homes may qualify for a discount of up to 25% if they have been properly retrofitted. Retrofitting involves strengthening your home's foundation to make it more resistant to shaking. It can help save money on insurance and repairs. The cost of earthquake insurance is usually higher for older homes, homes built of brick or masonry, homes with multiple stories, homes on sandy soil, and homes that are not up to code.
Before purchasing a policy, it is important to read it closely as there are typically many exclusions and limits on earthquake coverage. For example, earthquake insurance usually does not cover anything that your homeowners policy already covers, such as fire damage. However, you may be able to purchase a policy that covers commonly excluded items, such as awnings, plaster, and masonry chimneys.
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Cost and value
The cost of earthquake insurance in California is based on several factors, including the age of the home, the type of construction, the location, the cost to rebuild, the coverages selected, and the deductible. Older homes, particularly those built with brick or masonry and those with multiple stories, tend to have higher insurance costs. Additionally, homes built on sandy soil and those that are not up to code may also have higher premiums.
To estimate the cost of earthquake insurance, the California Earthquake Authority (CEA) provides a premium calculator on its website. It is important to note that CEA policies are purchased through residential insurers, and they offer separate coverage options for dwellings and personal property. While the CEA provides most earthquake insurance in California, there are a few other companies that offer similar policies without requiring the purchase of homeowners insurance from the same company.
The value of earthquake insurance lies in its ability to provide financial protection and peace of mind for homeowners in the event of earthquake damage. Earthquake insurance can help cover the costs of repairing or rebuilding a home, as well as temporary living expenses if the home is uninhabitable during repairs. However, it is important to carefully review the exclusions and limits of earthquake insurance policies, as they may not cover certain types of problems that occur before, during, or after an earthquake, such as fire damage or earth movement from a non-seismic event.
While earthquake insurance is not typically required by lenders or HOA associations, it is worth considering for residents in earthquake-prone areas. California law mandates that homeowners and renters insurance cover fire damage caused by or following an earthquake, so it is essential to understand the coverage provided by your existing policies before purchasing additional earthquake insurance.
To optimize the value of earthquake insurance, homeowners can consider retrofitting their homes to increase their safety and strength. This may include bolting the house to the foundation, bracing the chimney and water heater, installing automatic gas shut-off valves, and reinforcing cripple walls with plywood. Retrofitting can help reduce insurance costs and minimize potential damage in the event of an earthquake, making it a valuable investment for homeowners in California.
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Risk and preparation
Southern California is susceptible to earthquakes due to its location on the San Andreas fault, which is over 800 miles long, and other smaller faults like the Rose Canyon fault and the San Jacinto fault. According to the United States Geological Survey, almost three-quarters of Americans are at risk of damage from an earthquake.
The California Earthquake Authority (CEA) offers earthquake insurance policies for homeowners, mobile home owners, condo unit owners, and renters. The CEA is a privately funded, publicly managed entity that works with insurance companies to provide coverage. You can only purchase a CEA policy from the same insurance company that you have your residential property insurance with.
Before purchasing a CEA policy, it is important to understand the risks and exclusions. Earthquake insurance does not usually cover anything that your homeowners' insurance already covers. For example, fire damage is typically covered by homeowners' insurance, even if an earthquake causes the fire. Common exclusions in earthquake insurance policies include certain types of problems that occur right before, during, or after an earthquake, such as fire, and earth movement from a non-seismic event.
To prepare for an earthquake, you can take steps to strengthen your home and make it more resilient. Retrofitting, or making changes to increase the safety and strength of your home, can help lower the risk of structural damage. The CEA offers a discount of up to 25% on earthquake insurance premiums for older houses that have been properly retrofitted.
Additionally, it is important to have enough earthquake insurance coverage to rebuild your house if it is destroyed. The cost of earthquake insurance depends on various factors, such as the location of your home, the cost to rebuild, the type of construction, and the coverages selected. You can use the CEA calculator to get a quick earthquake insurance estimate and compare different policies to ensure you get the coverage you need.
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Frequently asked questions
Earthquake insurance is not required by law for homeowners in Southern California or anywhere else in the state or country. However, it is worth considering if you live in an earthquake-prone area. According to the California Earthquake Authority (CEA), no area of California is without earthquake risk.
Earthquake insurance covers damage to your home and structures attached to it, like your garage. It can also cover certain structures outside the dwelling foundation, such as awnings, plaster, masonry chimneys, and exterior water supply systems.
The cost of earthquake insurance depends on factors such as the location of your home, the cost to rebuild, the type of construction, the coverages selected, and the deductible. Earthquake insurance is typically expensive, but CEA policies are designed to be affordable and flexible. Older homes may qualify for a discount of up to 25% if they have been properly retrofitted.
You can purchase earthquake insurance from insurance companies that are members of the CEA. You must have a residential property insurance policy in place and purchase your CEA policy from the same insurance company that you have your residential policy with.
