Earthquake Insurance Challenges in California

Homeowners in California face many challenges living in the Golden State. Wildfires can pose a threat to homes and personal property in the summer and fall, and Californians must always be prepared for the possibility of an earthquake.

SGB has been servicing the Insurance Needs of California homeowners since 1989

California Earthquake AuthoritySGB understands the needs of California homeowners, and offers customized Home Insurance coverage to fit your specific situation. While the insurance companies we represent policies do not provide earthquake coverage, we offer coverage through their partnership with the California Earthquake Authority (CEA). Visit the CEA website to learn more.

After the 1994 Northridge earthquake, nearly all insurance companies completely stopped writing homeowners’ insurance policies altogether in the state, because under California law (the “mandatory offer law”), companies offering homeowners’ insurance must also offer earthquake insurance. Eventually the legislature created a “mini policy” that could be sold by any insurer to comply with the mandatory offer law: only earthquake loss due to structural damage need be covered, with a 15% deductible. Claims on personal property losses and “loss of use” are limited.

The legislature also created a quasi-public (privately funded, publicly managed) agency called the CEA California Earthquake Authority. Membership in the CEA by insurers is voluntary and member companies satisfy the mandatory offer law by selling the CEA mini policy.

Premiums are paid to the insurer, and then pooled in the CEA to cover claims from homeowners with a CEA policy from member insurers. The state of California specifically states that it does not back up CEA earthquake insurance, in the event that claims from a major earthquake were to drain all CEA funds, nor will it cover claims from non-CEA insurers if they were to become insolvent due to earthquake losses.

Earthquake Insurance | How the CEA Helps Homeowners

The CEA was created to ensure the market availability of earthquake insurance policies. Today, the agency offers earthquake insurance for most residential dwellings, including mobile homes and manufactured homes.

So, how does this help homeowners in practice?

“The only way to be financially secure while facing the damages that an earthquake can cause is to have a separate earthquake insurance policy, the kind that’s only available by the California Earthquake Authority,” says Glenn Pomeroy, the CEO of the CEA.

The formation of the CEA made earthquake insurance more readily available. If your homeowners’ insurance provider participates in the CEA, you can request an offer of earthquake insurance, and a CEA policy can be written at any time. This helps guarantee that families will have access to earthquake policy options, even if they’re already in the middle of an annual contract without coverage.

The CEA does not operate through taxpayer funding. In fact, it receives no financial support from the general state budget. The agency gets funding from private sources like investment returns and mandatory contributions from participating insurance companies.

Lastly, the law requires that the CEA must be actuarially sound, meaning that financial experts have determined the organization has sufficient funds to pay claims from even a devastating earthquake. The overall strength of the CEA is an enormous asset for homeowners because it means the agency can afford to pay fairly for claims. Premium rates have dropped by half since the CEA was formed, and policies currently average about $800 annually.

Looking for California Renters Insurance?

SGB Works with Liberty Mutual home insurance that isn’t just for homeowners. We also offer renters insurance to California residents who are renting and need to be protected in the event that their personal property is damaged or stolen.

California Home Insurance Discounts

No matter where in California you live, Liberty Mutual rewards your responsible choices with Home Insurance discounts that could help you save money. As a proud member of the California community, we offer exclusive savings to members of various college alumni groups, employers and associations across the state, including: the alumni associations of UCLA, USC, Cal Berkeley, San Diego State and Fresno State, along with employers like the Oracle Corporation and the City and County of Sacramento.

So, we’ve taken a look at renter’s insurance, but what about Landlord Insurance?