The California State Legislature created the California Earthquake Authority (CEA) in 1996 in response to the devastation left by the Northridge Earthquake in 1994. The main goals of the CEA were to allow the insurers to continue providing earthquake insurance at a time when most insurance carriers were withdrawing their earthquake coverage. This meant that for a lot of people their premiums were higher, but they were offered fewer benefits.
If you look at a typical homeowners insurance policy, you will see that it does not cover earthquake or flood damage like most people tend to assume. Earthquake insurance is not cheap, but the CEA set out to make earthquake policies more readily available and affordable for owners and renters alike, and in July 2006, they put into effect a 22% cut in coverage costs to make that possible.
The average costs of a CEA earthquake insurance policy can range between $500-$3000 per year. The difference in the cost of each of the policies offered depends upon your geographic location, seismic zone, your soil makeup, the age of your home, whether you rent or own your home, and the material the structure is made of. Your deductible will range from 2-20% of the replacement value of your home, apartment or business that you are insuring.
The CEA offers a premium calculator on their web site to help you estimate how much an earthquake insurance policy for your home might be. Factors like the location of your residence determine your rate, but the amount and types of CEA coverage you choose determine your premium. Some of the factors that will help them determine your premium are; the zip code of the insured property, the fair market value of your home, how much addition living expense/loss of use coverage you have selected, and the amount of loss assessment coverage is available or selected.
They also ask you the following questions to help you decide whether earthquake insurance is right for you and how much coverage would be adequate based on your individual situation.
* If you are a homeowner, how much equity do you currently have? Can you afford to lose that equity if an earthquake destroys or damages your home?
* Can you afford to replace your personal possessions (furniture, electronics, collectibles)
* If you cannot live in your home for any period of time because of earthquake damage, can you afford temporary accommodations elsewhere?
* What would the cost be to rebuild your home? Do you readily available funds to repair or rebuild?
* Do you have a line of credit, or a first or second mortgage on your home? Will you be able to continue paying on those loans while also having to pay for repairs?
The insured value of your home, business, or apartment for your earthquake policy should be the same amount of coverage specified in your homeowners insurance policy. If you are underinsured on your homeowners, then you will be underinsured for your earthquake coverage. How much earthquake insurance do you need then? You need enough to pay for the rebuilding or repair costs of your home, building, or business. The rebuilding costs should be reevaluated every year or so to keep up with current costs and inflation. You should also revisit your policy if any major changes or remodeling has been done. If you live in an earthquake prone area, having an earthquake insurance policy is the best way you can be prepared.
Since the Northridge earthquake in 1994, insurance companies have been raising premiums, and restricting the types of earthquake insurance policies they offer to homeowners, and renters. This has created a huge opportunity in the marketplace for competing insurance companies to create a reasonable, and competitively priced, high quality insurance for those needing earthquake insurance. The Arrowhead Earthquake Insurance program offers insurance products with more coverage, higher limits and lower deductibles. They boast very competitive rates depending on the geographic location, the age and risk of the structure.
What type of earthquake insurance you get will depend on what coverage you want. A policy may include coverage for the damage to your house, any other structures on your property, your personal belongings inside your home, additional living expenses while your home is being rebuilt or repaired, and coverage for any collateral damages and for building codes and ordinances to pay for upgrades or demolition to your home.
The Arrowhead Earthquake Insurance program lets you choose the amount of protection you would like. They offer a Superior Earthquake policy, Standard EQ, and Condo EQ policy. Whichever policy you decide to go with, the insured amount on the structure has to be equal to or greater than your homeowner’s policy that should accompany the earthquake policy through Arrowhead Insurance as well. The Superior EQ policy has you choose the amount you want your dwelling covered at, and it covers other structures on your property at 10%. The contents, or personal property in your home is covered at 50%, gives you Loss of Use coverage at 20% up to $25,000, Loss Assessments at $10,000, and your deductible can be set at 10%, or 15%.
The Standard EQ policy has you choose the amount you want your dwelling covered at, but has no coverage for other structures on your property, and no coverage for loss assessments. Your personal contents are covered at $5,000, Loss of Use coverage is $1,500, and your deductible is set at 15%.
The Condo EQ policy dictates that the condo must be built 1960 or newer, and it sets the dwelling limit at $25,000, and the content limit at a minimum of $25,000 to a maximum of $500,000. The Loss of Use coverage is set at $2,500, the Loss Assessments at $5,000, and your deductible is set at 10%. The applications for insurance policies or rate quotes can be completed securely and quickly online.
Very few renters think about adding the expense of a renter’s insurance policy on top of their monthly expenses, but really they should. Few realize that the building owners or owners of the homes they are living in have only insured the structure they are living in, not any personal belongings that their renters have brought in with them. In the event of a natural disaster like an earthquake, a fire, or water or mold damage, they are on their own to replace any personal belongings if no earthquake insurance for renter’s has been purchased.
Nobody likes to think about it, but accidents do happen. Your apartment building could get broken into; can you afford to replace your computer, plasma TV and other valuables that were stolen? Renter’s insurance after an earthquake can help cover costs if damage has been done to your car in the parking lot, or with personal possessions broken during the earthquake. Renter’s insurance will help in all of these situations.
Providers coverage will vary state by state, and they usually cover natural hazards such as water damage from plumbing or appliance failure, hail, windstorms, frozen water pipes, or smoke damage. For a higher premium, most providers offer additional coverage for hazards not covered in their standard policies. This may include renter’s insurance for hurricanes, or earthquakes, and the seismic zone that you live in will also determine the type of coverage you will be offered. As with a homeowner’s policy, you need to inventory all of your personal property. Some of the items you may want to consider including are:
* Cameras and camera equipment
* CD’s & DVD’s, stereos, VCR’s and TV’s
* All major appliances
* Musical instruments
* Furniture
* Glassware and China
* Books
* Clothing
* Collectibles, such as comic books, trading cards, stamps, and coins
* Jewelry
* Computers
* Artwork
There are many questions you should be prepared to ask your potential renter’s insurance provider.
* Are there any limits placed on personal possessions?
* Should you videotape or take pictures of any items?
* What circumstances are covered for personal liability?
* What sort of natural disasters is my location prone to, and in case of a natural disaster, how much am I covered for?
* If your building was destroyed or damaged, would you be covered for interim housing
Understanding the natural disasters, to which your location is prone, is going to help you get the renter’s insurance policy that is right for you. If you live in an area that is prone to earthquakes, obtaining additional renters insurance is crucial.
Since the very early 19 00’s, there have been major earthquakes in 39 states, and still it is estimated that out of the 60 million homeowners in the United States, 75 % of them are either underinsured for earthquake damage on their existing homeowners insurance policies, or carry no earthquake insurance at all.
Residents of California State, who live in fear of earthquakes every day, have one of the highest percentages of people uninsured for earthquake damages to their homes. It is estimated that only about 14% of homeowners in CA carry earthquake insurance on their current homeowners policies. The states historically most affected by earthquakes in the United States are Arkansas, California, Illinois, Kentucky, Louisiana, Massachusetts, Mississippi, Missouri, Oregon and Tennessee just to name a few. If you live in a region that is prone to earthquakes, the best way to protect your home is to retrofit and buy earthquake insurance. Many may not be aware that the basic homeowners insurance policy does not cover earthquake damage, and acquiring earthquake insurance can sometimes double your homeowner’s premiums, and it usually provides very limited coverage. However it is an addition that may be well worth your while to gather information about.
How much insurance do you need? You will need enough coverage to pay for the rebuilding or repair costs of your home. The amount should be reevaluated about once a year, or after any major changes such as remodeling has been done to your home.
What type of earthquake insurance you get will depend on what coverage you want. A policy may include coverage on your house, any other structures on your property, your personal belongings inside your home, additional living expenses while your home is being rebuilt or repaired, and coverage for building codes and ordinances to pay for upgrades or demolition to your home.
There are many factors that insurance companies will consider when you are applying for earthquake insurance. You will be asked if your home is brick, or log, has a cement or tiled roof, what kind of foundation your home has, is it located within 100 feet of tidal water, or located on a slope. Was your home built before 1980, and without an earthquake retrofit? As a general rule, homes built within the last 20 years were designed to conform to stricter building codes and will be better equipped to resist the force of an earthquake. Older homes are typically more vulnerable to earthquake damage, and a retrofit would be valuable.
Insurance companies will also take into account your geographic location. Those who live in states that are more prone to earthquakes will have higher insurance premiums and deductibles. Those states are also broken up into Seismic Zones, and each zone is assigned a number based on its susceptibility to earthquakes. If you live in a state that is prone to earthquakes, knowing your own seismic zone could help you determine whether you should carry earthquake insurance in addition to your homeowners policy or not.