Recent quakes in California highlight the lack of appropriate coverage
A recent spate of earthquakes in California has many homeowners worried about whether or not their properties are covered against the damaged caused by these natural disasters. On Friday last week, a 5.1 earthquake struck Southern California. The quake caused modest damage, but homeowners affected by the event are finding that they have to pay for these damages themselves as they lack the appropriate insurance coverage. The vast majority of homeowners insurance policies do not offer protection against earthquakes, but this is not well known among homeowners in California.
Estimated 90% of homeowners do not have insurance coverage for earthquake damage
According to the California Earthquake Authority, approximately 90% of homeowners in the state do not have insurance protection against earthquakes. The organization notes that approximately 40% of homeowners in the state had earthquake insurance in 1994, but insurance companies stopped writing earthquake policies shortly thereafter. Insurers opted out of providing earthquake protection after having to deal with $12.5 billion in claims from these disasters in a short period of time.
Homeowners may be avoiding coverage because of its expense
Homeowners may be avoiding earthquake coverage because of how expensive it is. The California Earthquake Authority had offered policies with a 15% deductible and $5,000 of personal property coverage, but few people had purchased this coverage from the organization. Now, the California Earthquake Authority offers a wide range of options, but many of them are coupled with high premiums. Homeowners are not required to purchase earthquake protection in any way, and most avoid this type of insurance coverage in order to cut down on costs.
Disaster aid may be misunderstood by many homeowners affected by natural catastrophes
In the event of a serious earthquake, the federal government could come in to provide relief aid. Many homeowners may have misconceptions when it comes to federal aid, however. Aid provided by the Federal Emergency Management Agency are considered loans that must be repaid over time. Insurance payouts are not loans and homeowners will not be liable for repaying the claims payouts they receive from their insurance provider.