Do you need earthquake insurance? Only 10 percent of Californians have coverage

BySimone Chavoor KGO logo

Tuesday, July 9, 2019

Here are a few common misconceptions about earthquake coverage, and why consumers should act before the next quake.

SAN FRANCISCO (KGO) -- Part of being prepared for the next big earthquake is making sure consumers have the financial protection to rebuild after the ground has stopped moving. But most people - even those that live in quake-prone California - do not have earthquake insurance. Only 10 percent of California homes are covered; 20 percent of homes in the range of the recent Ridgecrest quake had earthquake coverage.

Glenn Pomeroy, CEO of the California Earthquake Authority (CEA), thinks that this is due to several misconceptions on the part of consumers. The California Earthquake Authority is a not-for-profit organization that offers earthquake insurance, often partnering with other insurance companies to offer earthquake protection add-on policies.

"The thing about earthquake insurance that's important for people to realize is that it is specifically excluded from your homeowners' policy. Not covered. Excluded. That's true for the standard renters' insurance policy as well. It is excluded," Pomeroy says.

Fortunately, the ability to access earthquake insurance and put that protection into place is easier than most consumers believe. While pricing and coverage are based on multiple factors - such as proximity to a fault, or the age of the home - the average cost of earthquake insurance for a home is $800 per year. Renter's insurance on its own averages as $100 to $125 per year, making an additional earthquake policy even less expensive.

Prior to the Northridge earthquake in 1994, most earthquake insurance policies were "one size fits all," according to Pomeroy. After that quake "scared away" many insurance companies from offering earthquake policies, the CEA was formed to assist consumers. Instead of fixed deductibles, Pomeroy says that modern earthquake insurance policies allow for consumers to adjust the amount of coverage they want, so that they can control their premiums and deductibles.

Coverage should include replacement of the structure itself, but consumers can decide if they want to add on personal property coverage, or "additional living expenses" coverage in case they need to live elsewhere while their home is being repaired.

Consumers can get earthquake insurance by contacting their current insurance agent or by visiting the CEA website.

Pomeroy believes that the Ridgecrest quake will serve as a "wake up call." If a 7.1-scale quake were to hit the Bay Area, "We'd be looking at damages in the billions right now, maybe even insured damage in the billions, uninsured damage in the tens of billions. Perhaps thousands of homes destroyed. A 7.1 is a tough earthquake, and anyone who doubts that a 7.1 could happen, probably had their doubts eliminated on Friday night," he says.

For more information on the California Earthquake Authority, visit their website.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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