Go ask 10 of your friends, and you’ll discover that less than two of them have bothered to get earthquake insurance! That’s right – only 17% of Californians have an insurance policy that covers earthquake damage.
Why?… Because the coverage hasn’t always been very good!
In the early 1990’s, every company that offered homeowner’s insurance also had to offer earthquake insurance. But the 1994 Northridge earthquake was so devastating – and so expensive for insurance companies – that most of those companies decided to pull out of the market altogether. The Northridge quake caused an estimated $40 billion in property damage, the insurance companies chose to forego writing homeowners’ insurance policies rather than risk another quake-related financial disaster.
And that’s when the California Earthquake Authority (CEA) was born.
Created as a state-run insurance pool, the CEA gave homeowners a chance to get earthquake coverage. However, the coverage was very bare-bones. Back then, the most insurance coverage you could get was $5,000 – meaning that anything above that magic number was your responsibility.
And that’s when Californians developed a “why bother?” attitude towards earthquake insurance.
Things are different these days, though. Over the years, private companies have jumped back into the California earthquake insurance industry – meaning that homeowners now have more options than just the bare-bones coverage. At last count, 17 different insurance companies were offering earthquake coverage in California.
Still, though, Californians aren’t taking advantage of this protection. In fact, after the earthquake that hit Napa back in 2014, it was revealed that less than 6% of the homeowners there had earthquake insurance.
So, what if you want to join the 17%?
Talk to your insurance agent. He’ll be able to give you a variety of options so that you make the best choice for your home, your equity, and your family. And, he’ll be able to answer any questions that you have – like, whether or not a certain policy covers your garage or some other accessory structure, or whether a certain policy comes with additional living expenses if your home becomes unlivable after a quake.
But how much will it cost?
After the Napa quake, homeowners cited high premiums and a low chance of actually needing the coverage as reasons why they didn’t invest in earthquake insurance. Luckily, the CEA has been working hard ever since to make earthquake insurance more affordable!
In 2014, the CEA filed a 10% rate deduction with the California Department of Insurance. And, the CEA has come up with new options for earthquake coverage – including new deductible options, higher policy limits, and mitigation discounts. All of these changes will go into effect on January 1, 2016.
As an added benefit, the CEA has worked to make its fine print easier to understand. (But, of course, if you can’t figure out all of the ins and outs, a good insurance agent will be happy to explain them to you!)
Bottom line – if you own a home in California, an earthquake is the biggest catastrophic danger that you face. Here in the Golden State, it’s not a matter of IF a quake hits, it’s WHEN. If you think that you can’t fall victim to earthquake damage, think again. Instead of trying to convince yourself that you don’t need insurance coverage, go take a look at the new options that can give you a major safety net!
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