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The Coming Earthquake Bailout for California

When the “big one” hits, guess what? Very few in California are insured for it:

This month’s big earthquake in Eureka, followed by the far more devastating one in Haiti, should focus attention on the staggering uninsured losses that will result from the next big shaker in California unless something is done soon.

Statewide, only 12 percent of homeowners with insurance also have quake coverage. About 70 percent of that is underwritten by the California Earthquake Authority, a state-sponsored entity that sells quake insurance through commercial insurance companies.

The CEA admits that even with its insurance, homeowners could suffer “substantial uninsured loss.” Its policies pay nothing until structural damage alone exceeds 15 percent of the home’s insured value. After that, they pay for damage to structure and household goods up to the policy limit. The basic policy pays only $1,500 in living expenses if you can’t stay in your home.

If a large quake erupted on the Hayward Fault, only 6 to 10 percent of total residential losses and 15 to 20 percent of commercial losses would be covered by insurance, according to Risk Management Solutions, a firm that predicts damage from catastrophes.

By comparison, about 53 percent of the economic losses to homes and businesses following Hurricane Katrina were covered by insurance, including payouts from the National Flood Insurance Program.

The rest here.

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