California Earthquake Insurance Rates Decreasing

California earthquake insurance policies issued by the California Earthquake Authority will see rate decreases by an average of 22.1 percent, said Nancy Kinkaid, CEA spokeswoman.

Approximately 85 percent of CEA policyholders will see their rates reduced beginning July 1, 2006, while 15 percent will see rate increases, Kinkaid said. Recent geological and soil surveys created more refined maps that indicated areas are more stable than previously thought, leading to the reduced rates. However, the areas of Riverside, Palm Springs, Palmdale/Lancaster and Humboldt are likely to feel an increase because of less stable soil conditions, Kinkaid said. “A two-story home with a raised foundation in those areas will likely see the largest increase,” she said.

Independent agents can calculate the estimated premium and do a comparison of rates after the rate changes on www.earthquakeauthority.com. The Web site also has other information to assist agents, Kinkaid said.

One of the big misunderstandings about earthquake insurance is that the deductible is based on coverage A dwelling, not on the value of the home, Kinkaid said. Also, the deductible is not something the homeowner pays. “The deductible is merely subtracted from the total claim payout. It’s important for agents to know that because consumers are often misinformed,” she said.

In addition to the rate changes, the CEA has made product enhancements so that coverages no longer need to be sold in packages, but “now consumers can choose individual coverages that work for them,” Kinkaid added. For example, “now under the new bifurcated packages, consumers more concerned about finding another place to live can buy up to $15,000 for temporary housing. Before that coverage was only sold in packages,” she said. As another example, consumers can buy additional coverage for building upgrades. “This is significant because a lot of homes in California are 25 years or older, and we wanted to be able to offer additional coverage to meet new building codes,” she said.

Kinkaid said the rate changes do not affect policies issued by non-CEA insurers. CEA writes 70 percent of the 1.1 million earthquake policies in the state through 19 private insurance companies. Approximately 14 percent of California homeowners have earthquake insurance.