Response To "Should You Have Earthquake Insurance?"

On March 21st, I wrote an article asking owners of Palos Verdes real estateif they should have earthquake insurance (click here to read article).  I posed several questions and Carolyn Bruzzone, Farmers Insurance Agent, was kind enough to take the time to respond.  She answered my questions.  Here is her response:

My name is Carolyn Bruzzone and I am a Farmers Insurance agent and authorized to sell CEA through my company. My mother subscribes to your email newsletter and she thought it may be beneficial if I were to clear up some of your questions regarding the CEA Earthquake insurance.

As Glenn Pomeroy stated, the earthquake insurance is pretty much to get a roof over your head and get you back on your way to replacing your home, and even though it isn’t 100% there are some benefits that people do not normally consider.  First off, if there is an earthquake that is large enough to cause damage over your 15% deductible then it will almost certainly be declared a national disaster and FEMA will be sent out.  In this case people often think they won’t need earthquake insurance if the government is going to hand out money….here is where you go wrong!  FEMA first and foremost attempts to help people qualify for personal loans through various lending institutions in order to cover the reconstruction costs of their home.  If an applicant does not qualify for loans then they release funds of a pitiful maximum of $28,800 with startlingly low dwelling coverage of $5,000!  So, even if you have a very small house, lets say a bungalow with only $125,000 in dwelling coverage minus a 15% deductible ($18,750) the CEA policy would pay out $106,250!  That is at least over 3 times as much as FEMA will give a homeowner!  In addition, even if you have a CEA policy you can go to FEMA and try to receive aid, so you could very well get the money for the deductible back from the government.  In regard to the deductible, it is 15%, but this doesn’t mean that you have to come up with the money, the company simply deducts 15% from the dwelling coverage amount and sends you a check for the difference.  Also, if you prefer you can reduce your deductible to 10%, but this does increase the annual premium.  As far as coverage goes, the dwelling damage needs to exceed the deductible amount in order for repairs and personal property to be covered, but the personal property is not subject to a separate deductible.  For the Loss of Use/Additional Living Expense coverage, this can be activated even if there is no physical damage to the structure (such as a civil authority will not allow you into your home due to damages to the neighborhood, etc), and is never subject to a deductible.  Lastly, if you have a CEA policy, you can make a claim instantly and receive a check quickly, so you can coordinate with a contractor and get started on repairing/rebuilding your home, whereas without the coverage you have to stand in line with the 88% of homeowners who typically do not have earthquake coverage at FEMA and wait for a loan approval and possible help from the government, which is not going to be dispensed quickly, therefore putting you behind in getting repairs done, and all the while you have no insurance to help you with Loss of Use/Additional Living Expenses.

All in all, I know that CEA is expensive and it doesn’t cover everything, but I personally feel that it is certainly a whole lot better than paying for the repairs/rebuild all on your own in the event of earthquake damage.  It is a personal choice that each homeowner needs to make, but I do urge my clients to take the CEA policy.  My motto is better safe than sorry, and if you have to stand in line with FEMA, you’ll be sorry.

I hope this was helpful to you and possibly to your subscribers.

Sincerely,
Carolyn Bruzzone, Farmers Insurance Agent
CBruzzone1@FarmersAgent.com