3 Key Reasons to Consider Alternatives to the CEA for Earthquake Insurance
Established in 1996 following the devastating Northridge earthquake, the California Earthquake Authority (CEA) has been a go-to source for earthquake insurance. However, common misconceptions about the CEA's structure and offerings suggest it's beneficial to explore alternatives. Here are three compelling reasons for California homeowners to consider other options for earthquake coverage.
- Reason #1: Lack of Government Backing
Contrary to popular belief, the CEA is not an admitted insurance company nor is it backed by the California Insurance Guarantee Association. This means, in the event of fund depletion following a major earthquake, policyholders could receive reduced settlements or staggered payments, without any obligation from the state of California.
- Reason #2: Financial Stability Concerns
With a "B++" rating from AM Best, the CEA's financial strength is among the lower ratings for earthquake insurers in California. This rating reflects concerns over the authority's strategy for reinsurance procurement, directly impacting its capacity to settle claims.
- Reason #3: Limited Coverage
The CEA's policies exclude coverage for external structures (e.g., detached garages, pools, and patios) and have no provision for breakables or extensive personal property, capping personal property claims at $25,000. Such restrictions may not meet the comprehensive needs of many homeowners.