After seeing earthquakes rip through Japan and New Zealand, California is now being eyeballed as many realize how under-insured residents truly are.
A new bill backed by California senators, Barbara Boxer and Dianne Feinstein, is promising high insurance premiums to be cut by 30% and a reduction of large deductibles for homeowners – without having to come out of the tax-payers pocket.
The bill proposes that the California Earthquake Authority, a state run non-profit insurance program, will be allowed to apply for what’s called a, “guaranteed federal loan” in the event of a major earthquake. This process gives the CEA access to immediate, low interest funding from the Treasury. In order to qualify though, the group must be able to prove its ability to pay back said loan.
Currently, there are 9 out of 10 homeowners that do not have insurance. Since the pool of policy holders is so low, the CEA has had to make major purchases of reinsurance every year to provide solvency. If the S 637 bill is approved the need for reinsurance is severely lowered which will allow the group to pass the savings along to the consumer.
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Supporter Sen. Feinstein stated, “This legislation will allow homeowners to get back on their feet and recover more quickly in the event of a significant earthquake.”
Officials claim that it could even lower costs for the government over time. Insurance Commissioner Dave Jones stated, “This bill would enable state sponsored earthquake programs to lower the cost of earthquake insurance, increase the amount of coverage provided and lower deductibles at little or no cost to the Federal government. In fact, as more people buy earthquake insurance, the Federal government could even see a reduction in the monies it pays out in disaster assistance after an earthquake.”
Many California residents have asked, is earthquake insurance worth it? With only 12% of Californians insured, the hope is to bring more into the pool, and leave less that FEMA would have to pay in the event of a disaster.