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Home Insurance
The Mini Policy
In California, earthquakes are common and most people are known to buy earthquake insurance. However, when the 1994 Northridge earthquake happened, insurance companies nearly went broke paying off on claims and the amount they had to pay nearly exceed the amount they had been collecting selling insurance for the past thirty years.
This caused insurance companies in California to stop writing homeowners insurance policies. In California, the law requires companies offering homeowners' insurance to also offer earthquake insurance. With this difficult situation in hand, the legislature created what was called a ‘Mini Policy’.
This policy provided the basic coverage required, that is, it offered coverage for damages to the home structure but it excluded coverage for costly non-essential items like the patio, garage, shed, swimming pools, and detached structures. This policy made earthquake insurance more affordable for homeowners and enabled insurance companies to meet the mandatory requirement of having to offer earthquake insurance and at the same time avoid catastrophic losses due to claims.
The ‘Mini Policy’ came in as a real life have because a home is a person’s biggest asset and in an area which is prone to earthquakes, the mini-policy made earthquake insurance viable for home owners, because the cost of replacing or repairing damaged home structures can be very expensive.
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