Northridge earthquake remembered
Disaster struck Southern California early at 04:31 a.m. on the morning of January 14, 1994. When the shaking was done, and the damages tabulated, it was determined that 57 people lost their lives. The total clean up and repair of the devastation amounted to over $15 billion.
One of the more disappointing developments of this tragedy was the fact that most large insurance companies that sold homeowner policies in California made the announcement that unless they were permitted the privilege of selling everything BUT earthquake coverage they would depart the state. The companies that made this startling announcement indicated they did not want to risk another large loss. Well I cannot blame their logic, however I still believe this move forced the government, both state and national, to assume a risk that was initially designed to be handled by private industry.
What this whole situation developed into was the formation of the California Earthquake Authority. This organization was committed to fill the gap and enable policyholders to obtain earthquake insurance on their homes and satisfy the lending requirements of banks and mortgage companies.
However, an examination of the policy clearly shows that a large outlay of cash will still be required due to the fact the California Earthquake Authority’s Earthquake Policy calls for a 10% to 15% deductible application on your dwelling structure, and any extensions to the dwelling. This means that if the total appraised value of your dwelling structure and attached garage is $200,000, you could be saddled with a deductible of up to $25,000 before the California Earthquake Authority would kick in.
You can purchase additional coverage amounts for your Loss of Use, or Additional Living Expenses up to a total of $15,000. The same potential holds true for additional coverage necessary for Personal Property items. The basic plan sold by the Earthquake Authority provides for $5,000 in Personal Property Coverage with the potential for additional coverage, for an additional premium of up to $100,000 Coverage for Personal Property items.
It is just plain not right for the large insurance companies selling homeowner insurance to expect individual policyholders, or the Federal Emergency Management Association, to shoulder the additional cost of paying for your Additional Living Expenses, or clothes for you and your family should a terrible quake hit us. It is very possible that a $15,000 allowance for Additional Living Expenses would be used up prior to your home being repaired, or even before work could start, if the damages are wide spread.
In order for the citizens of California to prevent happening here what took place on the East Coast because of “Sandy” and the inability of FEMA to meet the immediate financial need of the damage repair cost, we need to do two things:
1) Call for the institution of the sale of a California Earthquake Deductible Endorsement to cover the cost of the individual policyholder’s deductible, based upon the 10%-15% principal currently in place by the California Earthquake Authority. This deductible endorsement could be sold by the agency or company through which you purchased your homeowners insurance.
2)The second thing will perhaps be the hardest and most likely impossible task, which is to insist that if companies selling homeowner insurance in this state at the present time, what to continue to do so, they need to start selling an affordable Earthquake Policy Endorsement. That endorsement will be designed to cover the Dwelling, Additions to the Dwelling, Personal Property and Additional Living Expense incurred. If that is done, The California Earthquake Authority can then sell that same policyholder the deductible endorsement, which will enable adequate coverage to be obtained.