An Offer of Earthquake Insurance [and Why you Get One Every Other Year]

Have you ever wondered why you get earthquake insurance offers in California? Why they seem to show up in the mail, even when you did not ask for one? Why homeowners that are insured in California, get Offers of Earthquake Insurance at least every other year.

California has some great laws. The state also has some curious laws.

The Basics on Homeowners Insurance and Earthquake Coverage:

In general – homeowners insurance in California does NOT cover you from the peril of earthquake. If its a seimic activity – home insurance excludes it. Not only does it not cover you for earthquakes, home insurance policies have a full land movement exclusion – land movement of any kind – is NOT covered.

Home Insurance and Earthquake Exclusions:

Here is a common exclusion for Earth Movement, from a ISO HO 00 03 10 00 [1999] form:

Under Section 1 Exclusions “We do not insure for loss caused directly or indirectly by any of the following…” Point 2 “Earth Movement. Earth Movement means a. Earthquake, including land shock waves or tremors before, during, or after a volcanic eruption.”

Consumers should read their own policy and their own earthquake exclusion. This specific language is likely to be different than yours.

If Home Insurance Companies Do not Cover your for Earthquake Why Do They Offer Earthquake Coverage?

Homeowners insurance companies, in California are rquired by State Law to Offer Earthquake Insurance by Insurance Code Section 10081-10089.4:

“No policy of residential property insurance may be issued or delivered or, with respect to policies in effect on the effective date of this chapter, initially renewed in this state by any insurer unless the named insured is offered coverage for loss or damage caused by the peril of earthquake as provided in this chapter.”

Lets look at this in a condensed verion “No policy of residential property insurance may be issued … unless the named insured is offered coverage for loss or damage caused by the peril of earthquake…”

There is lots more to the law – but that first sentence could be considered the most important. California Insurance Code requires providers of residential property insurance [of which home insurance is a type of] to provide offers of Earthquake Insurance.

Some of the more important provisions about said offer of earthquake insurance include the time period of said offer: “the offer of coverage required by Section 10081 may be made prior to, concurrent with, or within 60 days following the issuance or renewal of a residential property insurance policy.”

It is mandated the the following sentences appear:

“YOUR POLICY DOES NOT PROVIDE COVERAGE AGAINST THE PERIL OF EARTHQUAKE. CALIFORNIA LAW REQUIRES THAT EARTHQUAKE COVERAGE BE OFFERED TO YOU AT YOUR OPTION. WARNING: THESE COVERAGES MAY DIFFER SUBSTANTIALLY FROM AND PROVIDE LESS PROTECTION THAN THE COVERAGE PROVIDED BY YOUR HOMEOWNERS’ INSURANCE POLICY. THERE ARE EXCLUSIONS AND LIMITATIONS SUCH AS OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES, AND MASONRY CHIMNEYS. THIS DISCLOSURE FORM CONTAINS ONLY A GENERAL DESCRIPTION OF COVERAGES AND IS NOT PART OF YOUR EARTHQUAKE INSURANCE POLICY. ONLY THE SPECIFIC PROVISIONS OF YOUR POLICY WILL DETERMINE WHETHER A PARTICULAR LOSS IS COVERED AND, IF SO, THE AMOUNT PAYABLE. THE COVERAGE, SUBJECT TO POLICY PROVISIONS, MAY BE PURCHASED AT ADDITIONAL COST ON THE FOLLOWING TERMS:

(A) AMOUNT OF DWELLING COVERAGE: ____ (B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS BELOW THIS AMOUNT, YOU MAY NOT RECEIVE ANY PAYMENT FROM YOUR COVERAGE. YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO HOW THE DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR COVERAGE, THE INSURED VALUE OF YOUR COVERAGE, OR THE REPLACEMENT VALUE OF YOUR COVERAGE. (C) CONTENTS COVERAGE: ____ IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE FOR THE DWELLING, YOU WILL NOT RECEIVE ANY PAYMENT FOR THIS COVERAGE. YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO HOW THE DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE PURSUANT TO THIS COVERAGE. (D) ADDITIONAL LIVING EXPENSES: ____

(E) RATE OR PREMIUM: ____ YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE COVERAGE WITHIN 30 DAYS FROM THE DATE OF MAILING OF THIS NOTICE OR IT SHALL BE CONCLUSIVELY PRESUMED THAT YOU HAVE NOT ACCEPTED THIS OFFER. THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY YOUR ACCEPTANCE OF THIS OFFER IS RECEIVED BY US.”

Another Very important provision to the code is found in Section 10085: “If the insurer establishes proof of mailing or delivery of the required offer and the offer of earthquake coverage is not accepted by the named insured within 30 days from the date of mailing or delivery of the offer, there shall be a conclusive presumption that the named insured elected not to accept the coverage. An election, actual or presumed, by any named insured shall be binding upon any other person insured or any other party having an insurable interest in the insured property.”