Financial planning Do I need earthquake insurance?
Q: The devastating earthquake in
A: Although Californians experience 90% of the earthquakes in
First of all, you need to understand that your standard homeowner’s policy does not cover earthquake damage. In other words, unless you buy a special policy, you underwrite the risk yourself.
Second, you need to know that most earthquake insurance in
The CEA is a state-run insurance pool that issues earthquake insurance through a network of participating insurers. The list of participating insurers includes most of the major property and casualty insurance companies as well as several lesser-known companies. These participating insurers process all CEA applications, handle policy renewals and process all CEA claims, but the risk is actually assumed by the CEA. You can see the list of participating insurers at the CEA website (www.earthquakeauthority.com.) You can also use their free premium calculator to get an estimate of how much earthquake insurance would cost.
The cost of earthquake insurance depends on several factors, including when the house was built and the type of construction that was used. However, as with most things in real estate, the most important factor is location. For example, earthquake insurance in
Before buying earthquake insurance, you need to carefully consider how much of a deductible you will retain. Typically, deductibles are 15% to 20%, but you can get them as low as 5% or as high as 25%. The higher
the deductible, the less your insurance will cost, but the more you will have to spend out of your own pocket should your home suffer earthquake damage.
With a 20% deductible, the owners of the
One final word about earthquake insurance. Make sure you read your policy carefully. The typical earthquake policy is subject to very specific limits and not everything in your house may be covered. For example, artistic embellishments such as stained glass, mirrors, or inlays are specifically excluded from the standard CEA policy. Water damage from tsunami or other external sources is also excluded as is fire, even if the fire is the direct result of the earthquake. For more details, you can download a sample of the CEA policy from their website.
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