At first glance, it may appear that we are hitting up obscure topics by covering earthquake coverage when discussing buying homeowners insurance. Ostensibly, it might certainly be the case; in the continental United States, on a state-by-state basis, only a few folks may have the need to buy homeowners insurance with earthquake coverage. To the majority of people, when they are thinking of buying homeowners insurance that would cover earthquakes they think of California. As California is only one state out of 50, why would we write an article of such an obscure nature?
Consider just the single state of California for just a second. California alone, separated from the rest of the United States, has a Gross Domestic Product (GDP) which would push Canada off the list of the G-8 nations! Of course this does not include other states in the same time zone (Alaska, Oregon and Washington). According to Wikipedia, of the total US population, more than 12% live in the state of California. So it’s worth looking at a single state impact.
Given that, both Gudrun and Tcat agree that while considering the topic of an earthquake when buying homeowners insurance may not be a pleasant topic, and it is an important one!
We feel this is important because the standard homeowner’s insurance policy does not cover earthquakes. This means if you do not buy homeowners insurance covering this natural disaster, you still owe on the mortgage – for a house that might not even be habitable. So the question becomes, what are your options to buy homeowners insurance that will cover an earthquake? California is such a large real estate market; we will look at the state specifically, first.
California earthquakes made the specific type of natural disaster or a political hot potato. So in September 1996, the state legislatures created the California Earthquake Authority (CEA). While it is publicly managed, it is privately funded. However, that does not mean necessarily that buying homeowners insurance to cover earthquakes from the CEA is a great idea.
You may be able to get a better deal buying homeowners insurance covering earthquakes from a policy that is not from the CEA! Sure, we know that sounds crazy at first. So here’s the deal. The policy rates for earthquake insurance from the CEA are factored “across-the-board”. This is a great deal if you happen to live on the San Andreas or Hayward Faults. Therefore, if you are one of the many that live between San Francisco/Oakland down to Los Angeles area, we suggest you look at a CEA policy first.
And suppose you live in San Diego County? Sure, the San Andreas Fault is in that general region too. And the fall line is about 30 miles west, way out in the Pacific Ocean! If you are even just inland, say, for example in the Escondido district, the odds of you filing a claim for an earthquake are now less likely. Yet when you are buying homeowners insurance to cover an earthquake you are actually subsidizing the higher risk cities mentioned above!
For that reason, if are not in the relatively small, high-risk area for earthquakes, we advise you to look at buying homeowners insurance for earthquakes outside the CEA market! Of courses it is a good idea to check and get quotes from both sides. And we thought you would like a little insight on a good first step. After all, there are more of you in this situation then there are left-handed people in the United States. And the failure to buy homeowners insurance covering an earthquake is a recipe for disaster.
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