Everyone living here, whether a long time resident or a new arrival, knows that California and earthquakes go together like Ham and eggs. No matter what you do, you can’t guarantee that tomorrow won’t bring a shaker than rocks and rolls and knocks down your house! I remember the Loma Prieta quake of twenty plus years ago like it was yesterday. It was, at 7.1, the strongest quake to hit California since the infamous 1906 SF quake. Since then, we regularly experience smaller (thank God) rumbles from time to time. In fact, the night before last my wife and I were awakened from a deep sleep at around 2:30 a.m. by a “small” 4.4 jolt. It felt a lot stronger than 4.4, but, fortunately, did no apparent damage.
But what if a quake struck and destroyed or damaged your biggest investment–your personal residence? Wouldn’t it be nice to receive a check, less the deductible of 15% of the home’s value, to cover the damage? We think so. Read on for details.
A cluster of small earthquakes that rattled the Bay Area earlier this week helped remind us that we live on unstable ground. And yet, it’s a curious fact that very few California homeowners have earthquake insurance — barely 10 percent, according to the state Department of Insurance, and only 5 percent of renters.
It’s anyone’s guess whether these low numbers reflect stubborn indifference or a sensible comparison of risk versus insurance costs, but it’s a smart idea for all homeowners and renters to weigh the merits and drawbacks of earthquake insurance. Here are some points to consider:
- Homeowner, renter, and condominium insurance policies do not cover damage from natural disasters such as earthquakes. If you have a mortgage, you must have homeowner insurance. But you do not have to buy earthquake insurance.
- If you have homeowner insurance in California, your company must offer to sell you earthquake insurance.
- There are limits on what earthquake insurance pays. The insurance is intended to help put a roof back over your head but does not replace everything you lost.
- Renters and condominium owners can buy earthquake insurance to cover damage to belongings and to pay for living somewhere else while the living space is being repaired.
- Most earthquake insurance in California is offered through the California Earthquake Authority (CEA), a state-run insurance pool. You cannot buy earthquake insurance directly from the CEA; you buy it from insurance companies that are members of the CEA.
- The CEA revamped its rates in 2016, reducing them by an average 10 percent statewide and offering new deductible options ranging from 5 percent to 25 percent. The CEA also expanded its overage options to include personal property, living expenses, and loss of use.
- All insurance policies have exclusions — things the policy does not cover. Common exclusions in earthquake insurance policies include fire (already covered in homeowner policies), land (such as sinkholes from erosion), vehicles, and flooding (such as sewers or drains backing up).
- You may be able to reduce your insurance premium or deductible by retrofitting to make your home safer and stronger. Your insurance company must tell you in writing about these discounts.
Many of these earthquake-insurance topics are explained in further detail in a printable PDF document from the state Department of Insurance. Here some additional links to online resources:
- The California Earthquake Authority.
- the CEA offers online premium calculators for homeowners, renters, condo unit owners, and mobile home owners.
- Search for earthquake fault lines at the U.S. Geological Survey website.
- The California Seismic Safety Commission.
If you would like to talk with an insurance professional about earthquake coverage, consider ProInsurance, a Bay Area brokerage and Pacific Union’s insurance partner that offers earthquake-insurance policies.
Editors’ note: This is the second in an occasional series of earthquake-preparedness articles from Pacific Union. The first article offers tips on stocking an earthquake-preparedness kit.
Whether you have quake questions or want assistance on anything else relative to real estate, give us a call. We’d be pleased to help you out. The numbers: Peter: (415) 279-6466; Jane: (415) 531-4091.
Happy New Year to everyone.