Everyone knows Los Angeles is prone to earthquakes. The city developed a list of apartment and condo buildings that need work to withstand earthquake damage better, and there are specific steps you can take to make your single-family home safer, such as bolting it to the foundation.
Nonetheless, you may wish to consider whether purchasing earthquake insurance is worthwhile.
The California Earthquake Authority (CEA) writes the bulk, more than three-quarters, of the state’s earthquake insurance policies. This is a non-profit organization created by the legislature in 1996. You cannot purchase insurance directly from the CEA but from a member insurance company. However, California law requires all residential insurers to also offer earthquake insurance.
Your homeowners’ insurance company has to offer to sell your earthquake insurance annually. The policy also has to spell out the terms, in w including the premium, deductible, and amount it covers. You have 30 days to accept the offer, but you have to purchase CEA to provide earthquake insurance from the same homeowner insurance company.
You may think your homeowner’s policy covers earthquakes, but that is not the case. The rules may have created confusion since the policy pays out in the event of a fire caused by an earthquake, but you are out of luck for other earthquake damage.
What it coversWhat it covers
Homeowners should be aware that there are three portions when purchasing CEA earthquake insurance.
The first part covers your damage to your dwelling. The CEA offers deductibles ranging from 5%-25%. It does not cover exterior items such as landscaping or pools.
Part two relates to damage to your items in the home. These include your furniture, televisions, and laptops. There are coverage limits, starting at $5,000 but you can raise this up to $200,000.
The last part covers your cost to temporarily live somewhere else while the workers repair your home. This includes a home/apartment rental or a hotel, along with meals and other items such as a phone. Limits range from $1,500 to $100,000 and there is no deductible.
What it doesn’t coverWhat it doesn’t cover
Generally, earthquake insurance does not cover damage to your land or vehicles. It Earthquake insurance does not cover fire, but you get this through your homeowner’s policy.
Do I need it?Do I need it?
Whether to buy insurance is always a personal choice and comes down to your own preference to take on risk versus the cost. On the risk front, consider the cost to rebuild your home. Many people lost their homes and possessions during the large Northridge earthquake in 1994.
If your home is older, built from bricks, and has more than one story, it is more likely to sustain damage. But, you may want to consider forgoing insurance if you have retrofitted your home in order to minimize damage. You should consider whether your neighborhood is prone to earthquakes.
Remember, you pay to pay a deductive. The median L.A. home sales price was $575,000 last September. At this price, you would be responsible for $28,750.
The CEA provides a helpful premium calculator, which allows you to estimate the cost. You can use this information to further investigate your options.