Fair Plan Earthquake Insurance Detailed

Insurance Commissioner John Garamendi on Tuesday unveiled pricing and coverage details for the stand-alone earthquake insurance policies to be offered through the California Fair Plan, the industry-financed, high-risk insurance pool.

Those with homes built after 1950 and located in seismically active areas--virtually all of Southern California and the San Francisco Bay Area--will pay $3.25 in premiums per $1,000 of coverage, Garamendi said. Thus, a policyholder with $150,000 worth of coverage will pay $487.50 a year for a policy with a 10% deductible.

The rate for homes built before 1950 in seismic areas is $4.25 per $1,000. However, older homes retrofitted to withstand earthquakes will get the same rate as newer homes.

That’s a big increase from the current average of about $2 per $1,000 for earthquake coverage, though Garamendi has recently begun approving substantial rate hikes that will probably move the average closer to $3 per $1,000.

The Fair Plan policies will also have limited coverage compared to conventional policies. For example, coverage of a home’s contents will be capped at 20% of policy limits, and coverage will be skimpy for swimming pools, chimneys and exterior structures.

Facing total losses of $10 billion or more from the Northridge earthquake, most California insurers have suspended or sharply limited their writings of new homeowners and earthquake insurance, making it difficult for many consumers to find coverage.

State law requires insurance companies to offer earthquake coverage to their homeowners customers, so in order to avoid additional quake exposure, companies stopped selling both lines.

Allowing insurers to offer their customers earthquake coverage through the Fair Plan “should encourage them to once again make homeowners insurance available to California consumers,” Garamendi said Tuesday in a statement.