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Home > Earthquake Policies > Recent Policy and Rate Changes

Recent Policy & Rate Changes

Why did CEA Change its rates?

CEA is required to base our insurance rates on the best available science. In 2015, the US Geological Survey released a new earthquake fault zone and risk study, UCERF3, which changed previous earthquake risk models. As a result, we had to change our rating factors to reflect this most recent new science.

The California Department of Insurance approved a CEA rate and form filing in 2018 that went into effect July 1, 2019, directing CEA to implement new rates over three consecutive years, on:

  • July 1, 2019
  • July 1, 2020
  • July 1, 2021

What should you expect?

CEA policyholders may see their premiums increase, decrease or remain the same, depending on the product, property location, and/or other new rating factors.

Why are Some CEA Policyholders Experiencing a Premium Increase?

If your insured's premium has gone up, it may be due to one or more of the following factors:

  • New science showing increased earthquake risk in certain rating territories. CEA is required to base our rates on the best available science indicating risk of earthquake.
  • A change in rating territories to reflect the increased risk associated with those locations, as determined by new information on fault system locations.
  • Updates to include roof type as a rating factor for homeowners, because roof weight impacts the damageability of a house during an earthquake.
  • Expanded foundation-type differentiation to recognize combination (or other type) foundations are more damageable. (Some of these foundation types can be retrofitted. If properly retrofitted, your insured could receive a hazard reduction discount on their policy premium.)
  • Increased Hazard Reduction Discounts.
    • Other foundation types can now receive a discount of up to 15%.
    • Raised foundations can now receive a discount of up to 25%.
    • To receive the discount, your insured must have a contractor or structural engineer verify the retrofit by signing a CEA Earthquake Insurance Dwelling Retrofit Verification Form (DRV form), and submitting it to their residential insurer.
  • Refinement in year-of-construction categories, which recognize that construction techniques and building codes have improved over time. Newer construction is expected to perform better in an earthquake.

And of course, if the reconstruction cost of your insured's home has increased (as indicated by the insured value on the residential policy), the CEA earthquake insurance premium will also increase.

How Can You Help Your Insured Lower Their Premium If They Experienced an Increase?

Here are some strategies to lower the CEA earthquake insurance premium:

  • Choose a higher deductible (up to 25%) to pay a lower yearly premium cost.
  • Adjust the amount of coverage:
    • Reevaluate the coverage limit for coverages like personal property, in case it is higher than the value of the insured's belongings.
    • Select Homeowners Choice, which allows you to separate the insured's coverages, or just cover the dwelling itself, which will keep premium costs down.

Remember, our Premium Calculator can help you create a comparison for your insured to review.

If your insured has a pre-1980 home on a raised foundation, encourage them to apply for the Earthquake Brace + Bolt (EBB) or CEA BB programs to receive up to $3,000 toward a seismic retrofit, which could then qualify them for a premium discount ranging from 10% to 25% from CEA (depending on the house’s age).

Even if your client doesn't qualify for a retrofit grant, encourage them to consider retrofitting their older house out of pocket to receive a premium discount from CEA—although this does cost money up front, in the long term it makes their house safer and strengthens it against damaging earthquakes, plus they will receive a premium discount of up to 25%.

Learn more about CEA’s new rating factors and territories, and the science behind the changes.

How CEA Rate Changes are Approved

The California insurance commissioner must approve all earthquake insurance products and rates in the state, including CEA's.

CEA is a Not-for-Profit Company

When the California Legislature created CEA in the wake of the devastating Northridge earthquake, legislators mandated that:

  • We offer earthquake insurance to all Californians, regardless of their earthquake risk.
  • We use the best available scientific information to set our rates.
  • Our rates and rate changes are reviewed and approved.

And that we be:

  • Publicly managed by a governing board, which includes the Governor, Treasurer and Insurance Commissioner.
  • Privately financed, in part by our participating residential insurers when they join our organization, and by premiums we receive from our policyholders.

These requirements allow us to remain financially strong and ensure a firm commitment for us to be careful stewards of our policyholders' funds—we ensure pricing is fair to all policyholders and is tied to their specific earthquake risk.

Premium Calculator for Agents

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