Earthquake Insurance: What you need to know about policy insurance

With many insurance companies limiting coverage throughout California, what does this mean for those looking for earthquake insurance?

On January 17, 1994, the ground began to shake and in less than ten seconds there was devastation across Southern California. At the time, the Northridge earthquake was one of the world's costliest natural disasters, causing an estimated $35 billion in damage.

I changed the insurance in the state.

“Insurers had lost their shirts and were about to leave the state, so the California Earthquake Authority was created to be the financial engine behind the ability of insurers to stay in California and provide insurance,” said Gianelli Maffei of the California Earthquake Center. California Earthquake Commission.

Thirty years later, California faces another insurance crisis. Homeonwer policies are increasing dramatically due to increased fire danger and businesses are leaving the state again.

The number of earthquake insurance policies decreased by 5.5% last year. According to the Federal Emergency Management Agency (FEMA), only about 10-15% of homeowners have earthquake insurance. This means 1,615,561 policies in 2023.

If your home is damaged by an earthquake, your regular homeowner's insurance won't cover anything.

However, earthquake insurance is unique. They usually have a high deductible, so they only pay when there is significant damage.

“The home policy would probably be $3,500, and the earthquake insurance would be about $2,800,” said Rick Dinger of Crescenta Valley Insurance. “But you have to understand that in a 2,200-square-foot home, the deductible is probably about $118,000, so it's pretty heavy. The coverage is there but there has to be a lot of damage before the coverage kicks in.”

Living in Southern California – it's a fact of life that we will experience earthquakes. But how will your home hold up when a big earthquake hits?

Southern California faces enormous seismic risks, Maffei said.

Officials say since Northridge, there have been changes to make the homes safer. There are retrofit programs to enhance homes. Older buildings built before 2000 as well as so-called “soft story” buildings are at risk. Those are the ones that usually have ground floor parking.

“Unfortunately, the garage has very little capacity to hold up the second floor in the event of an earthquake. It has a lot of bright open spaces because of the garage and the large garage door – you can remove the elements that resist earthquake forces, which are the walls, to create this garage,” added Maffei.

Earthquake insurance is not mandatory but Dinger said he has seen firsthand how this type of policy can help someone rebuild.

He said he was “lukewarm” toward earthquake insurance — until he visited New Orleans a year after Hurricane Katrina.

“What I saw was that people who had flood insurance were able to fix up their homes. And for people who didn't have flood insurance, it's hard to get contractors, it's hard to get materials. It's hard to get all of these things because insurance is hard to come by,” he said. Dinger: “Companies come in and take all these materials and all the workers to take care of the insured claims.”

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