More on Earthquake Insurance

 In Blog Posts

CA Earthquake Insurance! If you own a home or building in California, you had better become familiar with the CEA.

Will the government help if a big quake strikes?

Assistance from the federal government may be available to assist individuals who have property damaged by earthquakes.  However, California residents should know that State and Federal disaster assistance programs have specific eligibility criteria and may not always be available, and Federal and State funds alone are unlikely to be enough to get your home back to its pre-disaster condition.  If the President of the United States declares a disaster, the Federal Emergency Management Agency (FEMA) may only grant limited assistance to those who qualify.  The Small Business Administration may make available low-interest loans to help with repairs – but you must qualify and of course, you must repay the loan – and they are entered in your personal net worth statement as a liability, offsetting an equal amount of assets. Affected homeowners may qualify for low-interest loans offered by FEMA through the Small Business Administration – but these are not college grants – homeowners are obligated to pay them back.

What About CEA Earthquake Insurance Policies – What types of policies are available from the CEA?

The CEA offers earthquake insurance policies to help homeowners, mobilehome owners, condominium owners, and renters recover from damaging earthquakes

How many CEA policies are in force throughout California?

The CEA has more than 800,000 policies in force, representing about 70 percent of all residential earthquake insurance policies sold in California.

How can I buy CEA earthquake insurance coverage?

CEA policies are sold and serviced exclusively through CEA’s participating insurance companies Call your broker, agent, or residential insurer to purchase to discuss the points of a CEA policy.

How are CEA premiums determined?

By law, the premiums must to allow the CEA to remain financially intact, to pay its covered claims.  CEA rates are based on the best available science for assessing earthquake risk and do not include any amount for profit.  As such, homeowners earthquake insurance premiums are calculated according to the dwelling’s insured value, location, construction-type, foundation, age, and number of stories, in addition to the policyholder’s coverage choices.

For what do the CEA premiums pay??

About 83% of funds the CEA collects are dedicated to claims-paying capital, reinsurance, and the costs associated with financing.  About 14% is allocated to agent commissions, and participating insurer fees.  Less than 3% is devoted to CEA operating expenses.

How does the CEA deductible work?

A CEA policy deductible is a calculation of the share of loss for which a policyholder is responsible.  For claims that exceed your CEA deductible, you needn’t spend money out-of-pocket before becoming eligible for payment on your claim.

How Much Earthquake Insurance Should I Buy?

The proper amount of coverage depends on your individual circumstances.  The following questions may help you decide:

  • Can you afford to replace your household possessions (such as sofas, beds, TVs, furniture, refrigerators, and clothing) if they were destroyed in an earthquake? How much would they cost?
  • If you have to find temporary accommodations because you cannot live in your home as the result of an earthquake, how much will you need to pay for those additional living expenses?
  • If you own your home, how much home equity do you have? Can you afford to risk losing that equity if an earthquake damages or destroys the home?
  • How much would it cost to rebuild your home? Do you have assets available to repair or even rebuild your home after an earthquake?
  • Do you have a mortgage, second mortgage, or line of credit on your home? Can you afford to continue repaying those loans while also paying to rebuild or replace your home?

Understand that the insured value of your dwelling for an earthquake policy is the same as the amount of coverage specified in your homeowners insurance policy underinsured on your homeowners policy, you are underinsured on your earthquake policy.

Recent Posts
Translate »