Earthquake Insurance from the California Earthquake Authority (CEA)

Earthquake Insurance from the California Earthquake Authority (CEA)

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The California Earthquake Authority (CEA) is one of the world’s largest providers of residential earthquake insurance. A publicly managed not-for-profit, it partners with insurers to help Californians manage their earthquake-related risks and losses. At almost 40% market share, CEA-affiliated companies write more earthquake insurance policies than any other insurers in the state.

Californians need earthquake insurance more than residents of other states. Nearly two-thirds of household displacement and short-term shelter needs caused by earthquakes came from California alone. This guide offers an overview of how CEA earthquake insurance works, enabling Californians to select the coverages they need to protect their homes.

Types of policies offered and limits

The CEA offers two policies for earthquake insurance: Homeowners Choice and Standard Homeowners. The biggest difference between the two policies is that the Homeowners Choice policy does not automatically include personal property or loss of use coverage.

While the Homeowners Choice policy can help you keep your earthquake insurance costs down, we generally recommend purchasing the Standard Homeowners policy. Unless you are confident you could replace your personal property and you have a place to stay after an earthquake, paying for loss of use and personal property coverage is worth it.

Coverage
Explanation
Included in Standard Homeowners?
Included in Homeowners Choice?
Coverage limits for both policies
Dwelling coverageCovers earthquake damage to the structure of your home and attached structures like a garageYesYesMatches homeowners insurance policy limits
Personal property coverageCovers earthquake damage to your belongingsYesNo; optional add-onMaximum of $200,000
Loss of useCovers the costs of staying elsewhere if an earthquake renders your home uninhabitableYesNo; optional add-onUp to $100,000
Building code upgradesCovers the cost of repairs to ensure they comply with current building codeYesYes$10,000 automatically included; maximum of $30,000
Emergency repairsCovers urgent repairs needed to forestall further damage, such as broken windows or glassYesYesMaximum is 5% of homeowners and personal property limit
BreakablesCovers certain categories of breakables, such as crystal, china and glasswareNo; optional add-onNo; optional add-onNone listed
Exterior masonry veneerCovers repairs to certain kinds of exterior masonry, such as brick or stoneNo; optional add-onNo; optional add-onNone listed

Deductibles for earthquake insurance

Your deductible will work slightly differently depending on whether you have a Standard Homeowners policy or a Homeowners Choice policy. If you have a Standard Homeowners policy, your insurance company will only subtract the cost of one deductible — the dwelling coverage deductible — from your claims payment.

By contrast, policyholders with a Homeowners Choice policy have a separate deductible for personal property coverage in addition to their dwelling coverage deductible. However, this personal property deductible is only required if the policyholder does not pay their dwelling coverage deductible. If the earthquake damage is so significant that a policyholder pays their dwelling coverage deductible, both dwelling coverage and personal property coverages kick in.

To clarify how deductibles work for the different policy types, we've outlined four hypothetical scenarios below:

Scenario 1: Carly and Carlos have a Standard Homeowners policy for their home. Their dwelling coverage limit is $500,000, their personal property limit is $50,000 and they have a 10% deductible of $50,000.

An earthquake does $400,000 worth of damage to their home and destroys $30,000 worth of personal property. After their 10% dwelling coverage deductible is removed, they receive $450,000 in dwelling coverage and $50,000 in personal property coverage.

Scenario 2: Amos and Aya have a Homeowners Choice policy for their home. Their dwelling coverage limit is $200,000 and their 5% dwelling coverage deductible is $10,000. Their personal property coverage limit is $50,000 and their 5% deductible is $2,500.

An earthquake does less than $10,000 of damage to the physical structure of their home, but destroys $25,000 of dollars in personal property. Their dwelling coverage deductible has not been met, so they receive no claims payment from their insurer and must cover the repairs out of pocket. However, their personal property deductible has been met, so they receive $47,500 to replace their personal property.

Scenario 3: Bill has a Homeowners Choice policy on his house. His dwelling coverage limit is $200,000 and his 5% dwelling coverage deductible is $10,000. His personal property coverage limit is $50,000 and his 5% deductible is $2,500.

An earthquake completely destroys his home and belongings. Because his dwelling coverage deductible has been met, his personal property deductible is waived. He receives $50,000 in personal property coverage and $190,000 in dwelling coverage after his 5% dwelling coverage deductible has been subtracted from his payout.

He also has $15,000 in loss of use coverage, which he puts towards a stay at a nearby Airbnb while his home is being repaired. There is no deductible on loss of use coverage, so he stays there at no cost to himself.

Scenario 4: Danielle has a Homeowners Choice policy on her house. She has $150,000 in dwelling coverage and a 5% deductible of $7,500 on it, but she opted not to get any personal property or loss of use coverage.

After an earthquake damages her home, her insurance company subtracts her 5% deductible from her claims payout, and she receives $142,500 in dwelling coverage. However, because she does not have any personal property coverage, she must replace her appliances, furniture and personal effects totally out of pocket. She also temporarily moves in with her parents until repairs are completed on her home because she does not have loss of use coverage.

CEA earthquake insurance for mobile home owners, condo owners and renters

Condo insurance in California does not typically cover earthquakes, so owners must purchase additional insurance to protect their property against damage. CEA offers condo owners the same coverages as homeowners, with the addition of loss assessment coverage. Loss assessment coverage helps you pay an assessment required by your homeowners association that covers earthquake-related repairs.

For example, say an earthquake damages not only the interior of your unit, but also destroys the windows and staircase in the common area. Your association has a master policy in place that covers those common areas, but that policy comes with a hefty deductible of $100,000. Loss assessment coverage would help you pay your share of that deductible, whereas dwelling coverage would pay for your own unit and personal property for your own damaged or destroyed items.

Mobile home insurance policies do not typically include earthquake coverage either. CEA earthquake insurance for both circumstances functions similarly to that of a fixed, standalone home, with the same standard coverages available: dwelling, personal property, loss of use, building code upgrade, emergency repairs and breakables.

Because structural damage is usually the responsibility of the landlord, CEA coverage options for renters are more limited than for homeowners. Earthquake insurance for renters does not include dwelling or building code upgrade coverages, but it does include personal property, loss of use and emergency repairs coverages. Breakables coverage is also available for renters who want to protect glassware and other fragile home goods. Policyholders are only responsible for a personal property deductible, since the other coverages kick in without one.

Companies participating in the CEA

Residents don’t purchase insurance through the CEA directly. Instead, policies are obtained through the CEA’s member insurance companies. Through its members, the CEA has the ability to pay claims exceeding $18 billion.

Participating insurers include some of California's major homeowners insurance providers, like State Farm, Allstate and USAA.

  • ACA Insurance (AAA)
  • Allstate
  • Amica Mutual Insurance Company
  • Armed Forces Insurance Exchange
  • ASI
  • Automobile Club of Southern California (AAA)
  • California FAIR Plan
  • Commerce CWest
  • CSAA-AAA Northern California
  • Encompass
  • Farmers Insurance Group
  • Foremost
  • Homesite
  • Hyundai Marine & Fire Insurance Policy
  • Liberty Mutual Group Business Insurance Agriculture/Farm
  • Liberty Mutual Insurance
  • MAPFRE
  • Mercury
  • Nationwide Insurance
  • Nationwide Private Client
  • Progressive
  • Safeco
  • State Farm Insurance
  • Toggle
  • USAA

Sources

CEA Homeowners Policy Coverages & Deductibles

Estimated Annualized Earthquake Losses for the United States

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.