Considering Earthquake Insurance


The recent 6.0 Napa Earthquake has reignited the conversation of earthquake insurance, though few residents in the state carry such coverage. The California Earthquake Authority estimates that around 10% of Californians currently possess earthquake insurance.

Cost appears to play a large role in many homeowners’ reluctance to buy earthquake insurance. Despite the risks of earthquakes in California, many are choosing to retrofit their houses or simply make post-earthquake repairs.

Crescenta Valley Insurance President Rick Dinger said that high deductibles can deter customers from purchasing coverage.

“The cost of earthquake insurance is about the same as what you pay for your home insurance,” said Dinger. But the deductible is  costly – up to 15% of the insured value of a homeowner’s dwelling according to the California Earthquake Authority website.

Dinger uses an example of an 1800 sq. ft. home in La Crescenta in which repairs cost $200 per foot, leading to a $54,000 deductible for $360,000 in repairs.

“So, you are paying $900 a year for a policy with a $54,000 deductible. That is pretty tough to swallow,” he said.

But Dinger said that those with plenty of equity should welcome earthquake insurance in the event of a large, damaging earthquake.

Earthquake insurance can be purchased through 17 insurance providers participating with the California Earthquake Authority (CEA), an organization established by the California legislature in 1996, following the 1994 Northridge Earthquake.

A press release from the California Earthquake Authority issued shortly after the Napa Earthquake says that CEA coverage includes $1,500 for emergency repairs to fix any damage to households or prevent any future damage. According to the CEA, this kind of earthquake damage is largely absent in homeowners’, condominium and renters’ policies.

In the same release, CEA CEO Glenn Pomeroy stated, “The CEA is ready to pay claims for residential damage from this event. CEA policyholders with damage should contact their home insurance company to file a claim as soon as possible.”

Earthquake insurance policies can vary in many other ways though, such as amount of personal property coverage, the age of the home, amount of repairs and retrofitting done, etc.

Earthquake insurance must be offered once every two years by homeowners’ insurance providers to their customers. These notices are required by law to state that “Your policy does not provide coverage against the peril of earthquake,” when a customer is purchasing homeowners’ insurance, with subsequent notifications in the following years.

AB 2064, a bill passed by the California State Assembly, strives to make the mandatory offers for earthquake insurance clearer to customers in order to facilitate the effectiveness of the California Earthquake Authority.

Another bill, AB 2735, would further amend these notifications for people with earthquake insurance below the standard coverage requirement, reminding them that better coverage is still available to them.

After the Napa Earthquake, California Insurance Commissioner Dave Jones said, “Mother Nature has given us numerous warnings to prepare for earthquakes, which we all know can strike any time. This reality was underscored by [the Napa] temblor. Californians must stop to take some very simple, but very effective, precautionary steps before the next quake strikes.”