The California Earthquake Authority (CEA) has announced significant updates to its policies and rates for 2025, affecting both new and renewing policyholders. The CEA reported these changes are designed to maintain the financial stability of the CEA and ensure adequate coverage for Californians facing the ever-present threat of earthquakes. Here’s a breakdown of what’s changing and how it might impact you.
Why Are These Changes Happening?
The CEA is required by law to keep its rates actuarially sound, meaning they must reflect the actual risk of earthquakes and the cost of paying claims. In early 2024, the CEA’s financial rating was downgraded by AM Best to B++, indicating that its ability to pay claims had become more limited. This downgrade prompted the CEA to increase its rates and make other policy adjustments to stabilize its finances and strengthen its claims-paying capacity. But, is this really enough if California is hit with the “Big One”?
The 2025 Rate Increase: What It Means for You
Starting January 1, 2025, the CEA will implement a 6.8% rate increase across all policies. The actual dollar impact of this increase will vary depending on your premium:
- Renters: The average annual increase of about $10.
- Homeowners: The average annual increase is approximately $70, but the exact amount depends on your policy details and location.
While the increase may seem modest for some, it’s important to evaluate whether your current policy still meets your needs and budget.
New Personal Property Coverage for Breakables
In a positive development, the CEA is reintroducing limited coverage for breakable items. Policies that include Personal Property Coverage (Coverage C) will now include a $500 sub-limit for breakable items such as glassware, pottery, ceramics, crystal, and porcelain.
Roofing Materials Clarification
The CEA has clarified how roofing materials are categorized for premium calculations:
- Solar shingle roofs will now be categorized with heavier roof types, such as tile, which are more susceptible to earthquake damage due to their weight.
- Mounted solar panels, however, will continue to be rated based on the underlying roof material, such as shingles or composition.
This clarification is particularly relevant for homeowners with newer solar shingle roofs, as it ensures transparency in how their premiums are calculated.
What Should You Do Next?
These changes are an excellent opportunity to reassess your earthquake insurance options. Many private insurance companies offer broader coverage and, in some cases, better rates than the CEA. Additionally, private insurers often have higher financial ratings, such as AM Best “A” or “A+”, which can provide greater peace of mind.
EarthquakeAgent.com specializes in helping homeowners find the best earthquake insurance for their needs. We provide earthquake insurance from private earthquake insurance companies that often include lower deductibles, more flexible coverage options, and competitive rates.
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