Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, August 26, 2014

California's Earthquake Spikes Outreach for Insurance

Earthquake effect

Last weekend’s earthquake in California has spiked an interest in homeowners to get, or improve, their existing insurance coverage.  There is much room for improvement in California when it comes to earthquake insurance as some of the costliest earthquakes have occurred in the state.  Surprisingly, only ten percent of California homes with homeowners insurance have earthquake coverage, which must be obtained on top of the standard homeowners policy. 

While earthquake insurance seems like a must in California, there is a caveat: some important limits on earthquake policies apply to aftershocks.  For policies obtained through the California program, coverage goes into effect for aftershocks as of the 16th day a policy is in effect.  If a new earthquake occurs just after the policy has been taken out, coverage is not available.  “You can’t insure a burning building.”

In California, major insurers through their participation in the California Earthquake Authority (CEA) program typically sell earthquake coverage.  The CEA describes itself as a “publicly managed, privately funded, not-for-profit organization.”  The authority was established to keep annual premiums as low as possible while also allowing financial stability for the program.  Yet this insurance has been a tough sale because many people think it is too expensive and they count on state and federal governments to step in with aid packages.  In some cases, this could be a “false hope.” 

It is recommended that those who are looking into earthquake insurance should not forgo buying it because of the high deductible.  “No earthquake insurance means you’re carrying a 100% deductible!”

See Leslie Scism, Insurance Coverage Likely to Get More Respect After the California Earthquake, The Wall Street Journal, Aug. 25, 2014. 


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