California is home to some of the most exhilarating natural wonders in continental USA. All this beauty comes with a price. Living in beautiful California faces the risks of forest fires, mudslides, floods, and earthquakes. Earthquakes in particular make one chilling prospect for most Californians. Impossible to predict, earthquakes have been known to cause catastrophic calamities on lives and properties. One way to cover this risk of property damage is to have Earthquake insurance.
Earthquake Insurance Offer and Coverage
Property owners are better served with an earthquake insurance to help defray the expense of costly earthquake repairs. Residential property insurers or insurance companies that sell homeowner policies for qualifying condominiums and apartments are obligated under the California Insurance Code (CIC) Section 10081 to offer earthquake coverage. Earthquake insurance offers must provide coverage for residential dwelling, for personal property not less than $5,000 or 10% of the covered dwelling loss, and for any additional living expense (ALE) of at least $1,500. The homeowner can opt to waive ALE coverage if the structure is not occupied.
California Earthquake Authority (CEA)
The CEA was established to provide earthquake insurance to residential property owners that include houses, condominium unit, mobile homes, and rented apartments. Under the CEA policy guidelines, the CEA member insurance company’s offer of earthquake coverage must meet the requirements as outlined in CIC Section 10089. Dwelling structures must be covered except other structures such as outbuildings, swimming pools, and masonry fences as in the case of many earthquake insurance policies.
Homeowners cannot purchase earthquake coverage directly from the CEA which does not offer stand-alone earthquake policies. Only licensed California insurers who are CEA accredited can sell CEA policies. Homeowners must have a valid residential property policy or be purchasing a new residential property policy from a CEA member insurer in order to be offered a CEA policy.
Special Earthquake Provisions
Insurance companies are required to offer earthquake coverage even if the property fails to meet Building Code and Health and Safety Code requirements. However additional premium and/or an increased earthquake deductible may be charged. Also, the insurance company must disclose any discounts due to strengthening or retrofitting for earthquake hazard reduction in writing.
Retrofitting can strengthen the house to minimize earthquake damage. Taking simple steps like bolting a wood frame home to the foundation can avert severe earthquake damage and reduce earthquake insurance premium. Residential retrofitting includes, but is not limited to the following:
- Anchoring a dwelling to its foundation through seismic bolting
- Reinforcing and/or bracing the fireplace chimney
- Securing and bracing the water heater to the dwelling frame
- Installing automatic gas shut-off valves
- Installing bracing for sheer walls
If the dwelling structure has been completely retrofitted as verified by the insurance company, a $10,000 coverage should be offered to cover reconstruction costs of bringing the dwelling up to current building codes.
The CDI publishes a Residential Property Claims Guide that anyone can request over the phone or access online. This brochure offers a valuable educational resource to have when facing any residential property claim. Contact the CDI through its website at www.insurance.ca.gov. GP
