Insurers Freeze Sales of Quake Policies

Earthquake insurance is hard to come by just when it seems like a good idea--right after a quake.

Insurers typically suspend the sale of new earthquake policies for three to 30 days after a quake, industry officials said. That’s to guard against fraud and to avoid paying claims from aftershocks that normally follow a quake for several days.

Quake coverage will probably be available in Southern California, said Richard J. Roth Jr., assistant state insurance commissioner.

Allstate Insurance Co. called a 30-day moratorium through the entire state of California on new earthquake policies. It was the only major carrier so far to issue a statewide moratorium, and it put a similar statewide hold two years ago after the Whittier quake.

Farmers Group, based in Los Angeles, has instituted a 30-day moratorium on sales of earthquake insurance in 20 counties surrounding the quake’s epicenter, spokesman Jeffrey C. Beyer said. But the insurance is available in Southern California, he added. “It’s fairly common to have a moratorium like this,” he said.

In any case, homeowners and tenants may want to think twice about such insurance and should consult an agent, the Western Insurance Information Service said.

Earthquake coverage, which is added to regular homeowners’ policies, can be expensive, carries high deductibles and might not be necessary. Most ordinary homeowners’ policies will cover much of the damage that might accompany a quake--damage from fire or water, for example.

Similarly, autos damaged by falling walls would likely be covered under comprehensive auto insurance.

Quake policies generally pay for damage not otherwise covered, as well as relocation costs if a homeowner is displaced. But because such coverage is meant for a catastrophe, it carries steep deductibles, generally around 10% of the coverage, applied separately to a building and its contents.

The owner of a $250,000 home in Oakland, for example, could be liable for up to $25,000 of damage from Tuesday’s quake, even with a quake policy. And the owner would face an additional deductible for losses to the home’s contents.

Costs vary. For a wood-frame home--the most typical California house--premiums range from $2 to $4 per $1,000 of coverage, according to the Western Insurance Information Service in Tustin.

Rates are higher if the house has a brick veneer. Rates also run higher on the coast or in the counties east of the Sierra Nevada mountain range--both areas of high quake activity.

A 1985 California law required insurance companies to offer earthquake coverage to all homeowners and tenants, though residents are not obliged to buy it. After the law passed, the percentage of homeowners with such coverage grew to about 20% from 7%.

By comparison, between 15% and 25% of state businesses buy earthquake coverage, according to the Insurance Information Institute.

Times Staff Writer James S. Granelli contributed to this story.