EARTHQUAKE: THE LONG ROAD BACK : Shaking Rates Loose : Quake Insurance Prices Run Gamut

Despite recent research indicating that some locations are more prone to earthquake damage than others, the cost of quake insurance in Southern California generally does not vary by where you live, only by who insures you, according to a study released Tuesday by Consumers Union.

Accordingly, until insurers begin to adjust rates based on earthquake risk--as they say they will--it pays to comparison-shop between insurers for the best rates on homeowner and the optional earthquake insurance, consumer advocates say.

Of the 15 largest homeowner insurers in Southern California that were surveyed, only three alter their rates based on where the home was located. The other 12--including the Big Three of State Farm, Allstate and Farmers--charge the same premium regardless of whether the home is in Santa Ana or Canoga Park.

There was also no price variation among those 12 based on whether the house sits on granite or landfill, or its proximity to a known fault--pivotal issues in determining how well a home survives a temblor, according to quake experts.

However, earthquake insurance prices vary dramatically by insurer, according to the study. State Farm generally charges the least: $231 for a $200,000 policy with a 10% deductible. Federal Insurance Co. charges the most: $600 for a similar policy, according to the survey.

“We price earthquake coverage differently, depending on the type of home construction--masonry or wood frame,” says Rick Dinon, senior vice president of 20th Century Insurance. “But we do not apply geographic differences at this time. Frankly, when we began writing the coverage, methods for figuring seismic risk were not terribly sophisticated.”

Experience gained from the recent Northridge quake and from the 1989 Loma Prieta quake in Northern California are likely to spur more risk-based pricing for earthquake coverage, Dinon and other insurers said.

The survey results provide a compelling argument to shop around, says Mary Griffin, an attorney in Washington for Consumers Union, the nonprofit organization that publishes Consumer Reports magazine. But shopping for quake coverage is not easy, she acknowledged.

That’s because few insurers will sell a stand-alone earthquake policy. The vast majority will sell earthquake insurance only if you are already buying a homeowner’s policy from them.

In other words, to get the best price, you must check several insurers for their rates for standard homeowner’s insurance--which covers fire and theft--and optional earthquake coverage. Then add the two together and compare.

When shopping for earthquake coverage, you need to keep an eye on deductibles and policy terms, experts note. While the standard earthquake policy has a 10% deductible, some insurers offer policies with lower deductibles. State Farm, for example, gives consumers the choice of a 10% deductible or a more expensive policy with a 5% deductible. Some companies also apply the deductible differently. The policies listed in the Consumers Union survey are substantially the same.

How much can shopping around save you? Consider a hypothetical homeowner living in Canoga Park who buys a $150,000 homeowner’s policy with a $250 deductible and a $200,000 earthquake policy, which has a 10% deductible. (The different policy values are used in the example because of differences in survey data.)

If that homeowner bought his policies from Federal Insurance, he’d pay a total of $1,439. If he bought from State Farm, he’d pay $819--a $620 annual savings.

However, if the homeowner lived in Hollywood, he’d pay more by insuring with State Farm than with Allstate. While Allstate charges a bit more for earthquake insurance, State Farm charges substantially more for the basic homeowner’s policy. As a result, the State Farm customer in Hollywood would pay a total annual premium of $990, $271 more than the Allstate customer.

There is a company, EQE Earthquake Insurance Services in San Francisco, which offers a separate earthquake policy that can be purchased in concert with any other insurers’ homeowner insurance.

But EQE, which is affiliated with the noted seismic engineering firm EQE International, does not offer sample rates comparable to those in the Consumers Union survey. Company President W. Rodney Smith says EQE’s premiums vary based on the consumer’s specific address, type of construction and the year the home was built.

The company feeds that information into a sophisticated computer program that plots a home’s location in relation to known faults. It also factors in soil types to determine exactly how much shaking is likely to occur at a precise address. With that information, the company determines a premium.

Someone whose home rests on landfill will pay nearly twice the premium of a homeowner whose house is built on rock, Smith says. If you’re 10 miles from the nearest fault, you’ll pay comparatively less than the person whose home is sitting at the intersection of Earthquake Central.

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It Pays to Shop Around

The cost of earthquake insurance varies dramatically by insurer but not significantly by location--no matter how close you are to fault lines or whether you live on granite or landfill, according to a newly released Consumers Union study. Consumers Union analyzed policies offered by 15 major insurers in 12 different Southland communities based on California Department of Insurance data. Here’s a sampling of survey results, based on a $200,000 earthquake insurance policy with a 10% deductible. Companies are listed in descending order of market share.

Annual cost of quake coverage Insurer Anaheim Canoga Park Hollywood Pacoima State Farm $231 $231 $231 $231 Allstate $300 $300 $300 $300 Farmers $254 $254 $254 $254 Fireman’s Fund $380 $380 $380 $380 USAA $344 $344 $344 $344 Safeco $388 $388 $388 $388 Federal $600 $600 $600 $600 20th Century $400 $400 $400 $400 Republic $360 $360 $360 $360 Transamerica $410 $410 $410 $410 ITT Hartford $600 $600 $600 $600 Aetna $454 $454 $454 $454 Western Mutual $250 $250 $500 $500 Prudential $300 $300 $300 $300 Cal Insurance Group $410 $194 $410 $410

in Insurer Santa Monica State Farm $231 Allstate $300 Farmers $254 Fireman’s Fund $380 USAA $344 Safeco $388 Federal $600 20th Century $400 Republic $360 Transamerica $410 ITT Hartford $400 Aetna $454 Western Mutual $250 Prudential $300 Cal Insurance Group $410