Why Everyone Is Starting to Buy Earthquake Insurance in California


It’s not widely known, but smart homeowners are starting to buy earthquake insurance in California. Contrary to what an outside observer might expect, conventional wisdom in California has been that earthquake insurance is a bad bet. Most homeowners did without, even knowing that a major earthquake could spell disaster for what for many is their primary asset and that their regular homeowner’s policy wouldn’t offer them any coverage. That might seem like a foolhardy case of denial, but it did have some justification.

After the Northridge Earthquake in 1994, private insurers refused to write earthquake policies, citing the higher-than-expected insurance claims after that catastrophe. The state-run insurance pool, the California Earthquake Authority, which was created in response, offered policies that offered drastically reduced coverage (compared to previously offered private policies) than consumers were accustomed to.

For example, deductibles on these new policies were 15 percent—meaning that if you were insured for $500,000, you would pay the first $75,000 in repairs out of pocket. The policy covered only $5,000 worth of goods inside your home, and nothing outside of it. And they offered barely any coverage for relocation if you were unable to live inside your home while it was being repaired. In short, the bill for coping with earthquake repairs would be so unaffordably high even if you had insurance that it hardly seemed worth it.

Fortunately, the dissatisfaction of California consumers has produced changes in the market. The one-size-fits-all bare-bones policy is now a thing of the past—consumers have a range of deductibles to choose from, which can be as low as 5 percent. You can adjust your desired level of coverage for personal property and loss of use. And the prices on new policies are the most competitive they’ve been in the last ten to fifteen years. In short, if you’ve passed on getting earthquake coverage in the past, it is worth taking a second look now.

In fact, more homeowners are doing just that. According to the California Earthquake Authority, 34,000 homeowners bought additional coverage in just the first year it was available. Nobody denies that having protection in the case of an earthquake is a good idea. Even a moderate earthquake can do severe damage to your home, and very few of us have the cash sitting around to cover that level of loss. Coping with major earthquake damage without insurance can mean taking on debt in the form of government disaster relief loans, if they are available, or losing your home to foreclosure.

Earthquake insurance offers the best value that it has in years. The expert agents at Stearns and Co. can help you determine the proper level of insurance you need to protect your home and property in case the “big one” strikes. Contact us today to get started.