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Originally Posted by Cadaverous Pallor
After the Northridge quake the insurance industry shut down earthquake insurance for some time (I think 2 years) while they restructured the entire system. They were forced to cover all kinds of stuff that wasn't clearly worded in their policies. When they did offer it again, for years afterward it was very expensive and covered barely anything. I don't know the status now,
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Almost no insurance copmany offers their own independent earthquake coverage anymore. However, they are required to offer all of their customers participation in a California state earthquake insurance policy. Basically, it offers (pretty limited) coverage at prices determined by the state. The financial backing for these policies is spread across all insurance providers licensed in California according to size of the compay, how many customers they have, how many participate in the plan, and other factors. This way, no company has to assume more risk than they are able to handle while consumers still have at least one option for earthquake coverage.
One of the ways insurance companies ended up paying out more than expected after the Northridge earthquake was due to the fact that several home owners that did not carry earthquake insurance were still able to succesfully make claims. How? Most standard homeowners policies insure against "collapse". Depending on the type of policy, if it did not specify that earthquakes were excluded as a covered cause of collapse, and the house did indeed collapse, the policy had to be paid.
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When Progressive Insurance's commercials say that they tell you what the competitor's rates are just to be fair, they're being misleading. When you call "Progressive" you're actually calling an insurance agent who sells insurance with many different companies.
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The term for this service is called a "brokerage". The other key difference is that a broker collects their fee from their clients, while an agent collects it from the specific insurance company to whom they are appointed. Although the term "broker" and "agent" are only loosely defined and carry the exact same licensing requirements.