Insurelane Insurance Blog

After the recent devastation in Haiti, many are wondering if Americans have the insurance protection they need in case of an earthquake.

Although some believe that an earthquake is the last natural disaster to cause catastrophe in their area, earthquakes can occur anywhere there are folding faults. According to the College of Charleston, South Carolina was hit by an earthquake that ranged from 6.9 to 7.3 on the Richter scale in 1986, which is as large as the earthquake that just hit Haiti last week. Proving that earthquakes can happen all over the United States and not just in California.

California is one state where earthquakes are viewed as a regular occurrence and causes little apprehension to most residents. Yet only 12 percent of Californians have earthquake insurance in addition to their homeowners policy. Earthquake insurance acts like flood insurance and is not covered by a homeowners policy but can be purchased in addition.

Residents can obtain quake insurance through the California Earthquake Authority (CEA) which is a state-sponsored program that sells the insurance through commercial insurance companies. The San Francisco Gate says that the CEA handles 70 percent of quake insurance policies and that the CEA publicly admits that even with the additional insurance, homeowners could experience “substantial uninsured loss” from an earthquake.

Why are Californians not purchasing or dropping their quake polices?

Residents with a current policy from the CEA pay an average premium of $707. This is quite expensive for the poor economic times and when people think there is little return in the investment. Even with the policy, people may not be qualified for returns if damage does not exceed 15 percent on the home’s value.

Compared to Hurricane Katrina, which paid around 53 percent of losses to residents and businesses; after a major earthquake in California, residents would only receive 6 to 10 percent of losses and businesses would see 15 to 20 percent. Making it hard for Californians to justify the expensive premiums and little return.

The CEA has realized the problems with its policies and is currently trying to pass legislation to decrease premiums and make the earthquake insurance more accessible and affordable.

The measures that are being taken by the CEA are critical to spreading coverage across the state. In many cases, people in neighborhoods without the insurance, cannot afford to repair the damage often leaving their homes in shambles. The vacancy of homes in a neighborhood increases other homeowner’s premiums in addition to making the neighborhood less attractive to potential buyers complicating many matters in purchasing a home in California.

Earthquake insurance coverage needs to be extended to more California property owners. No homeowner is exempt from possible disaster and should have considerable homeowner insurance policies to cover unforeseen events.

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