February 27, 2013
What is the California Earthquake Authority (CEA)?
The 6.7 scale Northridge earthquake that occurred in January 1994, was the costliest earthquake in U.S. history. At the time, Homeowners Insurance policies covered structural and personal property damage caused by earthquakes. The resulting monetary loss incurred by the insurance carriers as a result of the Northridge earthquake led many carriers to stop writing homeowners insurance in California altogether. Insurance carriers felt that the legal requirement to include earthquake coverage as part of homeowners’ insurance policies created an enormous financial risk. Several Insurance carriers, whose combined market share totaled 93% of California’s homeowners’ insurance market, had exited the market by 1995.
The lack of homeowners’ insurance availability in California caused the housing market to severely suffer. In 1996, California legislature established the California Earthquake Authority (CEA) — a publicly managed, privately funded entity that offers earthquake insurance to California homeowners. Insurance carriers in California could either offer their own privately funded earthquake insurance product or they could become a participating insurance carrier of the CEA. Farmers Insurance Group, one of the largest insurance companies worldwide, is a participating carrier of the CEA. The CEA does not sell directly to consumers; coverage can only be obtained through a participating carrier such as Farmers Insurance Group.
Most standard insurance policies for homes, mobile homes, condominiums, and rental properties do not include earthquake coverage. Just like flood insurance, earthquake insurance usually must be purchased as a separate (additional) policy. California law requires that insurers, and their agents, that sell residential property insurance must also provide the offer of earthquake coverage to their policyholders at the time of property insurance purchase.
Scientists and the seismic history in California make it certain that major earthquakes will strike. When, where, and at what magnitude an earthquake will strike is unknown; however, what is known is that when it does — property damage will ensue. It is imperative that property owners have adequate coverage in place to insure against resulting damage and loss caused by an earthquake. There are many things to consider when purchasing a policy, such as: the amount of equity in the home, the cost to rebuild, the cost of temporary housing, and more. Dave Terpening Insurance Agency, Inc. has helped thousands obtain earthquake insurance for their homes and properties. Our knowledgeable staff of professionals can assist you with all of your earthquake and residential property insurance needs.