Wednesday, February 15, 2017

Earthquake Insurance is Cheaper than You Think

In 2015 the United States Geological Survey released its Uniform Earthquake Rupture Forecast which says that there is a 93% chance that California will be hit by a 6.7 magnitude earthquake in the next 30 years. That is almost double the size of the Northridge quake. Quakes are a clear and present danger for everyone living in the state. Northridge caused about $40 billion is property damage and about half of that was for homes. Because of the huge payouts, not only did premiums rise, many insurance companies reduced the number of polices they wrote. In response to this, the state Legislature created a basic no-frills policy that insurers could offer, but the coverage left a lot to be desired. Earthquake insurance coverage stagnated.

Earthquake Insurance Coverage Is Low

Despite the danger we all face, only about 10% of California homes have earthquake insurance. There are 2 main reasons for this. The first is that the rates for this coverage were high and many homeowners thought that they couldn’t afford it, in spite of knowing the risks they ran. The other reason is that many presumed that if a quake hit them, federal and state aid would help them recover. That is a major misconception. The aid is meant only to help families survive in the aftermath of a quake, not to repair the damage and rebuild their homes. As for the cost of the coverage, it is less expensive than you think.

New Coverage Options

The California Earthquake Authority (CEA) is a publicly managed organization that provides earthquake insurance through a number of leading insurance companies. Today, the CEA provides around 75% of all earthquake policies sold in California. The Authority’s CEO says that a new research has allowed the risk to be recalibrated and that rates have come down by almost 50%. The large amount of options available enables homeowners to tailor their earthquake insurance options to match their needs and their budgets. For example, the deductible can now be set at anywhere from 5% to 25%, instead of the old range of 10% to 15%.  Coverage for property inside the home can now range from zero to $200,000 instead of the old limit of $5,000. And when a home is uninhabitable after a quake, the loss of use coverage can be between 0 to $100,000.

Today, a home with slab foundation and frame construction can get a basic CEA coverage for just $804 per year.

Get the Coverage that is Right for You

If you do not have earthquake insurance, now is the time to get the coverage you need. And if you do have a policy, this is when you can relook to see if it offers you the protection you need and if not, get additional coverage without emptying your bank account. Earthquake insurance is a complex subject and balancing coverage, deductibles and premiums requires expert knowledge. Contact an insurance broker to know where you stand and what additional coverage is available to you.

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