Earthquake Insurance

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Please note: This articles was written for the Redding, California, area, but it is pertinent to anyone who lives in an earthquake zone!

Living as we do in the shadows of two volcanoes, people in this area should be concerned about earthquake insurance. For years there was a law that required insurance companies to sell earthquake coverage along with a normal homeowners' policy and it could be purchased relatively inexpensively for $2 per $1,000 of coverage per year because the insurance companies used earthquake insurance as a "loss leader" without consideration for underwriting, or the costs if there were claims.

The Loma Prieta and Northridge earthquakes hit in 1989 and 1994, respectively, and insurance companies had to pay many large claims. The insurance companies came to the realization that the premiums for the earthquake insurance must have some relationship to the probability of claims. Insurance companies threatened to leave California unless the legislature did something. The insurance companies' man in Sacramento, Insurance Commissioner Chuck Quackenbush, came to their rescue instead.

Quackenbush successfully lobbied and pushed through an earthquake relief authority that limits the insurance company's liability. Insurance companies may now offer a policy that has a 15% deductible before coverage kicks in, for only one building, with a maximum benefit of $5,000 for contents, and $1,500 loss of use. This means that you have to lose 15% of your property before there is coverage and you cannot collect more than $5,000 for all your worldly possessions. Thus, if your $150,000 house suffers earthquake damage, your damages must exceed $22,500 before you get a dollar out of an insurance company. The Earthquake Authority assures only that the insurance companies in California will be guaranteed they will make profits. Their reserves now are 2.5 times the cost of the Northridge quake, alone.

Have you ever had a claim with an insurance company that you disputed and felt that they had offered you too little to compensate you for your loss? In virtually every letter from any insurance company to a claimant telling them that "this is it, drop dead," there is a reference that you have the right to complain to the insurance commissioner if you feel that you have been dealt with unfairly. Good luck, because you will be complaining to the Insurance Commissioner, Chuck Quackenbush, the insurance companies' protector.

Insurance companies place profits first. If a claimant does not know their rights, the insurance company will try to get away with anything. A lawyer will get the claimant what they are entitled, not what the insurance company wants to pay.