With CEA insurance, can I use my insurance proceeds to purchase a new home? joanna mandell asked 6 months ago
With CEA insurance, can I use my insurance proceeds to purchase a new home?

My elderly parents recently lost their home in the Palisades Fire, and I have helped manage the insurance claim for them. As a result, I am now scrutinizing my own policies more carefully. My husband and I live in the Bay Area (Oakland, CA) and have a CEA policy as a companion to our homeowner’s policy.

My question is:

I have learned that under CA insurance code, one is entitled to use their coverage to purchase a new home or rebuild elsewhere if they don’t want to rebuild on their existing property.

If an earthquake hit the Bay Area and we lost our home, are we entitled to the same under CEA?

1 Answers
Answer for With CEA insurance, can I use my insurance proceeds to purchase a new home? United Policyholders Staff answered 6 months ago
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Hi Joanna,

Since you’re taking a closer look at your policies, I’m sharing some additional thoughts beyond what you specifically asked because they are important and also very valid.

The Oakland/Bay Area is one of the most expensive regions in California to rebuild. As a reminder, CEA policies do not include extended replacement cost coverage, so it would be wise for them to revisit their limits to ensure they’re adequate.

A few years ago, the CEA’s financial strength rating was downgraded to B++. There are other A-rated earthquake markets available, and I’d encourage them to work with their broker to obtain comparison quotes. This is especially relevant given that many homes in Oakland are older, and some of those alternative carriers offer stronger building ordinance or “code upgrade” coverage that could be valuable.

Lastly, while funds from a CEA claim can typically be used to rebuild elsewhere if there is no mortgage, the situation changes when a lender is involved. In that case, the mortgage company has a rightful claim on insurance proceeds. Customers could still decide to move rather than rebuild, but some or all of the payout may first need to be applied to satisfy the loan.

Best,

Amir Filsoof