You have homeowner's insurance. You're protected against everything, right? Wrong!
We've seen lots of changes in our environment lately, and you may not be aware your policy doesn't include certain circumstances. So do you need Earthquake insurance? Read our handy Q&A to find out:
Q. Why do I need earthquake insurance?
A. In California, your residential insurance policy doesn’t cover your home or your belongings against earthquakes. If you don’t have earthquake insurance, you’re not covered for earthquake damage or any additional costs needed to live elsewhere while your home is being repaired or rebuilt.
Q. Why choose CEA earthquake insurance?
A. The not-for-profit CEA is one of the world’s largest providers of residential earthquake insurance. CEA rates are based on science, not profit, enabling us to use the best science available to determine competitive earthquake insurance rates. CEA is actuarially sound and could pay all covered claims if the 1906 San Francisco, 1989 Loma Prieta, or 1994 Northridge earthquake reoccurred today.
Q. For earthquakes, do customers need to buy a separate policy from a private insurer or from the state’s California Earthquake Authority?
A. Yes, the standard homeowners / renters policy does not cover you in the event of an earthquake. Policies are available through both the California Earthquake Authority and through private insurance companies. As of today’s date most private insurers have declared a moratorium and are not accepting new business. The CEA is accepting new business and has never had a moratorium.
Q. Is earthquake insurance expensive? Is the cost higher in some areas of the state?
A. CEA offers coverage and limit choices as well as more deductible options to help you find a policy that best meets your needs and budget
Earthquake insurance can be higher in some areas of the state, if you live in an area that is near fault lines or areas that have had a higher rate of damage claims associated with earthquakes you may see higher premiums in that area. If you live in an area that has not experienced many claims / damage, you will typically experience lower annual premiums.
The great news for us in the High Desert is that CEA has dramatically lowered their rates effective 7/1/19. Recently a home that was quoted before 07-01-2019 experienced over a $700 annual savings even with lower deductibles and higher personal property coverage than the first quote. Many Homeowners policies will give an additional discount for having the Earthquake policy attached which can help offset the cost of the new Earthquake policy even further. Please contact Armstrong Fairway Insurance Agency or your current trusted insurance agent to see if your home, condo or mobile home is in an area of the High Desert where earthquake insurance rates have dropped significantly. (CEA also provides renter’s insurance for personal belongings and loss of use coverages.)
Q. What are the premium costs of EQ insurance for a single family? What are the deductibles?
A. The premium is based partly on the Replacement cost of the home that was determined for the Homeowners Insurance policy. It is also based on the zip code of where the home is located, the history of Earthquake claims, as well as several other factors. The standard deductible is 15%, but lower deductibles as low as 5% are available through CEA. To figure out the deductible multiply the A-Dwelling cost x 15% (a home with a $350,000 replacement cost x 15% = $52,500 deductible) It is important to note that deductibles are never paid up front. The total payout for the claim is paid out less the deductible. If you have a $150,000 claim you would be paid $97,500 ($150,000 - $52,500 deductible from above example = $97,500 claim pay out).
Q. I heard that catastrophic damage to property is the only reason to have EQ insurance. Thoughts?
A. The reason this has historically been true is because of the way the deductible is calculated. In the above example a $350,000 home with a 15% deductible would have a $52,500 deductible. The damage would have to exceed $52,500 for anything additional to be paid out. This is why in the past most people typically considered it a Catastrophic Damage policy. With the recent CEA premium changes in our area you can now choose lower deductibles than 15% with options at 10% or as low as 5%. This would lower the same policy deductible to $17,500. In my opinion, the value of the CEA policy has increased dramatically due to lower premiums in addition to potential Homeowners policy discounts, smaller deductibles and increased coverage. It’s becoming a lot less Catastrophic coverage and a lot more common sense / peace of mind coverage.
Q. Will CEA pay for any expenses if I have to move out of my home because of earthquake damage?
A. If you purchased Loss of Use coverage, you are eligible for the additional living expenses necessary to maintain your normal standard of living, up to the coverage limit you selected. (CEA also provides renter’s insurance for personal belongings and loss of use coverages.)
Q. Is there a waiting period to purchase EQ insurance? How about after an event?
A. Insurance companies may put a moratorium on purchasing Earthquake Insurance in or around the epicenter of a recent earthquake. There are several factors that a company will use to determine how long a moratorium will be in place and how many miles from the epicenter they will restrict. It is important to have the protection in place prior to any earthquakes to make sure that you and your property / belongings are protected. You will automatically get an earthquake insurance quote in the state of California with any purchase of a homeowners or Renters policy. You can sign up the same day you receive the quote unless a moratorium is placed in your area.
As of this time most private insurers are not accepting new business. The CEA is accepting new business with some exceptions. NEWLY Issued CEA Policies will not cover damage caused by EQ’s or aftershocks related to the recent Ridgecrest EQ until 10:33 AM 7/19/19. CEA can still issue a policy as of this time.
Q. So bottom line, What should I do?
A. Call you current homeowners insurance agent or carrier. They will give you the best advice for your individual needs.
As always, Armstrong Fairway Insurance Agency is always here and ready to help the High Desert Community whenever you need help with any of your insurance needs.