When is it worth buying earthquake insurance?
What should San Diego County residents know about earthquake insurance policies, risks, and costs?
Quality Claims Management considers earthquake coverage to be catastrophic insurance. You will only need it if we have a really big earthquake. However, depending on where you live in San Diego and how much you’ve invested in your home, you can choose to get coverage. Here is what you need to know.
First, most standard insurance policies for homeowners, mobile home owners, condos, and renters DO NOT cover earthquake damage. Like flood insurance, earthquake insurance generally must be purchased separately.
However, fire insurance is part of most homeowners insurance policies. This means that your home insurance policy can cover a significant portion of the damage if your home catches fire or is damaged in a fire caused by an earthquake.
Much of the damage that often arises from an earthquake occurs after the ground stops shaking. Gas lines that have broken and are beginning to leak can catch fire and burn your home to the ground. In San Diego County, it is also very possible for your home to be consumed in a wildfire caused by the movement of an earthquake many miles away. A power line may have collapsed. A house may have caught fire due to the earthquake and the flames traveled many miles through the undergrowth to your home.
Another important factor is water damage. Earthquakes often break pipes. Even small earthquakes can rupture a water or sewer pipe that floods your home and can cause significant damage to your floors, carpets, furniture, even the structure of your home.
If your homeowners insurance includes fire and flood damage, you should be covered for this “earthquake” damage, even if you don’t have earthquake insurance.
Another danger from earthquakes is landslides. You may or may not have coverage for this. You should check your homeowners insurance policy to make sure of your coverage for both landslides and fires. If your house burns down, is it completely covered? Will you be able to replace your house and all your belongings?
Check out our other articles on homeowners insurance for details on coverages and what you need to know.
Where do you get earthquake insurance?
Insurers selling residential property insurance within the state of California are required by law to offer earthquake coverage to their policyholders. Most of these California earthquake insurance policies are underwritten and administered by a government organization known as CEA, the California Earthquake Authority.
Although most earthquake insurance policies are sold through the state-run insurance group, some private companies also sell earthquake coverage. To provide earthquake coverage, insurance companies can become participating CEA insurance companies and offer CEA’s residential earthquake policies or they can manage risk themselves. To date, companies that sell more than two-thirds of residential property insurance in the state have chosen to become CEA participating companies.
According to CEA’s website, CEA’s homeowners policy is designed to help you return home after an earthquake. CEA’s base limits policy for homeowners includes:
Home Coverage – The coverage limit is the insured value of your home listed on the Supplemental Homeowner’s Policy.
* Personal property coverage – $ 5,000
* Additional coverage for living expenses / loss of use: $ 1,500
* You can select a 10% or 15% deductible on your homeowners coverage, and CEA’s increased limit options allow you to increase personal property coverage up to $ 100,000 and additional life / loss of use coverage up to $ 15,000.
Residential property insurance includes coverage for homeowners, condo owners, mobile home owners, and renters.
Earthquake insurance is not designed for minor losses, as you must have enough damage to exceed your deductible. Although deductibles are generally 10-15% of the amount of the Coverage A limits, it can be a bit confusing to calculate the actual amount of the deductible as there are several factors that go into the formula.
How will your home handle an earthquake? Do you need earthquake insurance?
– Where in San Diego County do you live?
– What is under your house (rock, sand, fill, etc.?)
– How is your house built? – Does it live up to the code and why is it important to your coverage?
Age and type of construction contribute to how a residential structure reacts during an earthquake. Based on scientific and engineering research, CEA’s premiums reflect the following rating factors:
– In general, houses built on a slab perform better than those built on raised foundations.
– One-story houses are less vulnerable to earthquakes than multi-story houses.
– Unreinforced masonry structures are more susceptible to damage than those built with a wood frame.
– Houses of a certain age are not as solidly built as others.
The type of home you have affects your risk. One-story homes that are “attached,” with the roof bolted to the walls and walls to the foundation, tend to survive earthquakes and windstorms better than multi-story homes that are not. Unsurprisingly, homes with large openings, such as flat-glass windows or large garage doors, perform worse than those without those features.
Also, your home can be substantially fortified with some special building measures. For many, this may be a better investment than buying earthquake insurance.
The Institute for Business and Home Safety has a “Fortified for Safer Living” program that specifies construction techniques that can help homes better withstand disasters.
Other California earthquake insurance factors
No known loss letter requirement
In areas that have previously been affected by an earthquake or other catastrophic event, an insurer may require an “Unknown Loss Letter” with all applications for earthquake insurance or to add earthquake coverage to an existing policy. These types of letters confirm that there has been no known loss or damage at the requested coverage locations.
DIC Policy
DIC (Difference in Conditions) insurance provides coverage designed to close specific gaps in standard insurance policies. It allows you to customize the coverage to extend to exposures such as water damage, floods, landslides, earthquakes, landslides, etc., according to the needs of the insured. DIC coverage can be provided through a separate insurance policy or can be added through an endorsement to the basic policy.
Is Earthquake Insurance Right For You? How much equity do you have in your home?
As mentioned above, we consider earthquake coverage to be catastrophic insurance. You will only need it if we have a really big earthquake. The more equity you have in your home, the more insurance you need.
According to UnitedPolicyHolders, a nonprofit that fights for the rights of insurance consumers and educates individuals and businesses on how to get a fair deal, “a generally accepted rule of thumb is that you should not risk more than 10 percent of your liquid assets … A major earthquake could mean that 10 to 100 percent of your home’s structure could be damaged or destroyed, up to 20 percent of your belongings could be damaged, and / or you may have to contribute $ 3,000 per month for temporary rent and relocation costs. “
In San Diego, we have many smaller earthquakes on a regular basis. These are reminders for YOU to review your current coverages to make sure you are adequately insured. Is your current home insurance current? Will it be worth rebuilding your home to current building codes? Do you have additional coverage and riders for all the new things you may have bought since you first bought your insurance policy?
Remember, pipes are much more likely to break or fires to start from smaller earthquakes. If any of these situations occur, you should be covered under your regular homeowners policy. Check that it is up to date and has enough coverage. As a result of the 2003 and 2007 wildfires, we have found that the majority of homeowners in San Diego are underinsured.
By the way, companies should review their policies to make sure they have EQSL, or sprinkler loss coverage. You are more likely to be injured by sprinkler leaks than from falling from a building.
by Ronald Reitz, President of Quality Claims Management