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From the Windows to the Walls: California Homeowners Consider Earthquake Coverage

Posted on: August 12th, 2019

By: Kristin Ingulsrud

Californians witnessed a series of earthquakes over the recent Fourth of July Weekend, prompting a ten-fold increase in visits to the California Earthquake Authority’s (“CEA”) website.

The CEA is California’s primary earthquake insurer, created after the devasting 1994 Northridge Earthquake, which measured in at a magnitude of 6.7 and caused $20 billion in damages.  The recent earthquakes measured at 7.1 and 6.4 magnitudes, but were centered in a less urban area—insurance payouts are estimated at less than $1 billion.

Geological research known as the Uniform California Earthquake Ruptured Forecast predicts an increasing likelihood of additional large earthquakes.  So why do only 13% of California homeowners have earthquake insurance?

There’s the cost—earthquake coverage adds an average of $800 a year in premiums.  Many Californians also have sizeable mortgages to consider, reasoning that more of the risk is carried by the bank.  Deductibles are high, ranging from 5% to 25%.  Typical damages from an earthquake may be less than the standard 15% deductible, making it reasonable for some homeowners to self-insure.  Some residents may decide they are better served by investing their money into safety upgrades.

Even given these variables, it is still surprising that only 13% of California homeowners carry earthquake insurance.  It remains to be seen whether the recent Ridgecrest earthquakes will serve as a wake-up call sufficient to increase the rates of earthquake coverage among California homeowners.

If you have any questions or would like more information, please contact Kristin Ingulsrud at [email protected].

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