October 5, 2015

Thoughts on Earthquake Insurance

In the last couple of years the world of .   Companies have become more competitive and more standalone insurance carriers have entered the market.  Unlike Flood Insurance, which in certain Special Flood Zones can be required by lenders, Earthquake Insurance is usually not required, even if people live in a high risk area.  Just because your lender does not require it, does not mean that you should not consider EQ Insurance.  However, Earthquake Insurance has changed a bit recently.

Earthquake Insurance has changed:

1.Why is Earthquake Insurance more affordable now?

From the independent insurance agent’s standpoint, Earthquake insurance seems to be more affordable for three reasons:  1.  New Higher Deductibles, as high as 25% are now available.  2.  More Standalone Earthquake carriers (such as ICAT, Geovera, and Arrowhead) 3. From what I hear and read, new mapping technologies are now available to the insurance companies themselves.  This can be of help to some clients.

2.  Should I spend money retrofitting my home or buying Earthquake Insurance?

I am not a contractor, but in certain situations, it could make sense to first start to spend your money doing things like bolting your home to its foundation, adding plywood to your cripple walls, and making sure your water heater and gas connection are properly and legally secured.   Also adding an automatic gas shutoff valve may make sense as well, although this can cost a bit of money.  See my blog post on what is an earthquake valve is.   However, there is no comfort like insurance and it may take time to retrofit your home.   Of important consideration though, is the understanding that you may NOT be able to insure an older home that is not retrofitted.

3.   What does an Automatic Earthquake Valve look like?:

Again, please read my blog post:  What is an automatic gas shutoff valve.

4.   What is covered by Earthquake Insurance?

A regular standalone earthquake insurance policy would provide coverage for the structure (Coverage A), it may have coverage for “Other Structures“, it probably has a limited amount of personal property coverage, and it may have a relatively limited amount of “loss of use coverage ”   This is not a complete list of what is covered, but it is the general nuts and bolts.

5.  Does my home insurance cover me and my home from the peril of Earthquake?

An endorsed home owners  (homeowners) policy in California almost never covers earthquake insurance these days.   If you want to get covered for earthquake insurance from  your home insurer, call them today to request an endorsement.

5.   Is the extended endorsement coverage from my homeowners insurance also on my Earthquake Insurance?:

No, it is is usually not.  If you do not know what an extended rebuild endorsement is  (this is why should contact an insurance broker) just know it is computed in the rebuild value of your home.

6.   Can swimming pools be covered by Earthquake Insurance?:

Yes, swimming pools can be covered under earthquake insurance, although make sure you ask your independent agent or broker about this special coverage.

7.  Why do I get an offers of Earthquake Insurance constantly from my current home insurer?:

Offers of Earthquake Insurance are regulated to be sent out to existing and new home insurance on some sort of regular basis, this is determined by the California Department of Insurance.

8.  What is the CEA?

The CEA is the California Earthquake Authority.   The CEA is a non profit provider of “residential earthquake insurance.”  They “encourage (all) California homeowners and renters to reduce their risk of earthquake damage and loss through education, mitigation, & Insurance Policies…”   The CEA writes earthquake insurance through their participating insurers in California this is typically done as an endorsement to your home insurance policy.   The CEA is essentially one method of obtaining earthquake insurance.

9.  Should I buy Earthquake Insurance direct from my Homeowners Insurance Company through the CEA?

In my opinion, I believe that you should buy Earthquake Insurance only after pricing and comparing a quote from your home insurer AND a standalone carrier.    In a general sense most carrier sponsored Earthquake Insurance is priced higher and often does not allow you as many options for increased coverages (with higher costs) or lower coverages (with lower costs.)  As of the writing of this blog post CEA policies are limited to a 10% and 15% deductible with no coverage option for swimming pools.    Standalone Earthquake Carriers have better options almost all around.

Scott W Johnson – California Insurance License 0H11625

Marindependent Insurance Services LLC – California Insurance License 0K10734 – 415-294-5454

Thank you for reading “Earthquake Insurance has changed” – Kindly read our disclosure.  Please seek licensed counsel in all circumstances when considering purchasing or changing insurance.