After the devastating Northridge earthquake in 1994 which cost $44 billion in losses, insurance companies restricted the issuance of policies to cover earthquakes for fear of not being able to pay out again.
In 1996 the state established the California Earthquake Authority (CEA) to fill the gap. It is non-profit, publicly funded and privately managed, and it allows insurers to offer an earthquake policy to its customers, with some financial contributions. Today the CEO covers 820,000 homes in California. However, in addition to the CEA-covered customers there are only approximately 340,000 additional homes covered with earthquake insurance, leaving 90% of California homeowners uncovered.
Given that we an expect another big one in the next 30 years, the CEA moved to lower premiums for California homeowners starting in January, to be followed later in the year with a mix and match policy – cover just the building or your possessions, or both. That way you can decide on your premium.
The CEA will not issue the policy, nor will they send out adjusters, this will be done by your participating insurance company. And the CEA policy will not cover everything that your homeowners policy covers. It will help you rebuild and recover from any disaster, after you pay a 10-15% deductible. This enables the premium to be kept lower.
You may think that your homeowners insurance covers earthquakes. It does not. Also FEMA is not going to rebuilt your home. They may provide disaster assistance , and any loan provided by the government to rebuild would have to be repaid.
So if you are a Los Angeles homeowner and you don’t have earthquake insurance, you had better be safe than sorry.
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