The CEA Insurance Company

The California State Legislature created the California Earthquake Authority (CEA) in 1996 in response to the devastation left by the Northridge Earthquake in 1994.  The main goals of the CEA were to allow the insurers to continue providing earthquake insurance at a time when most insurance carriers were withdrawing their earthquake coverage. This meant that for a lot of people their premiums were higher, but they were offered fewer benefits.   

If you look at a typical homeowners insurance policy, you will see that it does not cover earthquake or flood damage like most people tend to assume.  Earthquake insurance is not cheap, but the CEA set out to make earthquake policies more readily available and affordable for owners and renters alike, and in July 2006, they put into effect a 22% cut in coverage costs to make that possible.    

The average costs of a CEA earthquake insurance policy can range between $500-$3000 per year.  The difference in the cost of each of the policies offered depends upon your geographic location, seismic zone, your soil makeup, the age of your home, whether you rent or own your home, and the material the structure is made of.  Your deductible will range from 2-20% of the replacement value of your home, apartment or business that you are insuring.   

The CEA offers a premium calculator on their web site to help you estimate how much an earthquake insurance policy for your home might be. Factors like the location of your residence determine your rate, but the amount and types of CEA coverage you choose determine your premium.  Some of the factors that will help them determine your premium are; the zip code of the insured property, the fair market value of your home, how much addition living expense/loss of use coverage you have selected, and the amount of loss assessment coverage is available or selected.  

They also ask you the following questions to help you decide whether earthquake insurance is right for you and how much coverage would be adequate based on your individual situation.  

 v     If you are a homeowner, how much equity do you currently have?  Can you afford to lose that equity if an earthquake destroys or damages your home?

v     Can you afford to replace your personal possessions (furniture, electronics, collectibles)

v     If you cannot live in your home for any period of time because of earthquake damage, can you afford temporary accommodations elsewhere?

v     What would the cost be to rebuild your home?  Do you readily available funds to repair or rebuild?

v     Do you have a line of credit, or a first or second mortgage on your home?  Will you be able to continue paying on those loans while also having to pay for repairs? 

The insured value of your home, business, or apartment for your earthquake policy should be the same amount of coverage specified in your homeowners insurance policy.  If you are underinsured on your homeowners, then you will be underinsured for your earthquake coverage.  How much earthquake insurance do you need then?  You need enough to pay for the rebuilding or repair costs of your home, building, or business.  The rebuilding costs should be reevaluated every year or so to keep up with current costs and inflation.  You should also revisit your policy if any major changes or remodeling has been done.  If you live in an earthquake prone area, having an earthquake insurance policy is the best way you can be prepared. 

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