Hall, Mahar & Associates Insurance Services Blog

Workers' Comp in California: What Every Employer Should Know

Tue, 13 Oct 2026 03:15:18 GMT

California's Workers' Compensation Requirements Explained

The moment you hire your first employee in California, you're legally required to carry workers' compensation insurance. Not when you reach a certain number of employees. Not when your business reaches a specific revenue threshold. From day one, with employee number one, coverage is mandatory.

California's workers' compensation laws are among the strictest in the nation, and the penalties for non-compliance are severe enough to put small businesses out of operation entirely. Yet we regularly talk to business owners who don't fully understand their obligations, what their policy actually covers, or how the system works when an employee gets injured.

Whether you're hiring your first employee, running an established business, or just trying to understand why your workers' comp premiums are what they are, here's what every California employer needs to know.

Who Needs Workers' Compensation Insurance in California?

California law is clear: if you have one or more employees, you must carry workers' compensation insurance. This requirement applies regardless of whether your employees work full-time, part-time, temporary, or seasonal. If they're on your payroll, they must be covered.

Employees vs. Independent Contractors

The biggest confusion we see involves independent contractors. Business owners often believe that hiring contractors instead of employees eliminates the need for workers' comp coverage. That's partially true, but California has strict definitions about who qualifies as an independent contractor.

California uses the "ABC test" established by Assembly Bill 5 (AB5) to determine worker classification:

A: Autonomy - The worker is free from your control and direction in performing the work.

B: Business scope - The worker performs work outside the usual course of your business.

C: Customary trade - The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

All three conditions must be met for a worker to be classified as an independent contractor. If you fail even one part of this test, that person is legally an employee and must be covered by your workers' compensation policy.

Misclassifying employees as independent contractors to avoid workers' comp obligations is one of the most common and most costly mistakes California businesses make. The penalties include steep fines, back premiums, and potential criminal charges.

Exemptions and Special Cases

Very few exemptions exist in California. Sole proprietors without employees are not required to carry workers' comp for themselves, though they can purchase voluntary coverage. The same applies to business partners and some corporate officers, depending on ownership percentage and other factors.

If you're operating as a limited liability company (LLC) with multiple members, or a corporation with multiple shareholders, the rules become more complex. Some owners may be exempt while others are not, depending on ownership structure and job duties.

When in doubt, carry coverage. The cost of covering one additional person is minimal compared to the penalties for non-compliance.

What Workers' Compensation Insurance Actually Covers

Workers' compensation provides specific benefits to employees who are injured or become ill as a result of their job. Understanding what's covered—and what's not—helps you manage both your obligations and your employees' expectations.

Core Benefits Provided

Medical care: All reasonable and necessary medical treatment related to the work injury, including doctor visits, hospital stays, physical therapy, prescriptions, and medical equipment. There are no deductibles or copays for the injured employee.

Temporary disability benefits: If an employee can't work while recovering, they receive temporary disability payments equal to roughly two-thirds of their average weekly wages, subject to state-set minimums and maximums. These benefits continue until the employee returns to work or reaches maximum medical improvement.

Permanent disability benefits: If an injury results in permanent impairment, the employee receives compensation based on the severity of the permanent disability and how it affects their future earning capacity.

Supplemental job displacement benefits: If an employee can't return to their previous job due to a work injury, they may receive a voucher for retraining or skill enhancement.

Death benefits: If a work-related injury or illness results in death, workers' compensation provides burial expenses and ongoing support for dependents.

Employer Liability Protection

Here's the other side of workers' compensation that many employers don't fully appreciate: workers' comp insurance also protects you. In exchange for providing guaranteed benefits through the workers' compensation system, you receive immunity from most employee lawsuits related to workplace injuries.

Without workers' comp, an injured employee could sue you for unlimited damages, including pain and suffering, lost future earnings, and punitive damages. With coverage in place, the workers' compensation system provides the exclusive remedy in most cases, capping your exposure to the defined benefits and protecting your business assets.

There are exceptions—particularly when employer misconduct is involved—but the liability protection is one of the most valuable aspects of carrying workers' comp coverage.

What's Not Covered

Workers' compensation doesn't cover injuries that occur outside the course and scope of employment. An employee injured during their commute, on their lunch break away from the workplace, or while engaging in prohibited conduct typically won't be covered.

Injuries resulting from intoxication, self-inflicted wounds, or injuries occurring while committing a serious crime are also generally excluded from coverage.

How California Workers' Comp Costs Are Calculated

Workers' compensation premiums confuse business owners more than almost any other type of insurance. The calculation involves multiple factors, and rates vary dramatically by industry and individual business circumstances.

The Classification Code System

Every job function is assigned a classification code based on the type of work and the associated injury risk. A desk worker in an office has a very low classification rate. A roofer working at heights has a very high rate.

Your business might have multiple classification codes if you have employees performing different types of work. Payroll for each employee is assigned to the appropriate classification, and each classification is rated separately.

Classification codes are determined by state bureaus and insurance rating organizations, not by individual insurers. Getting your employees classified correctly is critical—misclassification can result in significant premium adjustments during audits.

Experience Modification Rate (EMR)

Once your business has been operating for a few years and has enough data, you'll receive an experience modification rate (EMR). This number compares your actual workers' compensation claims experience to the expected experience for a business of your size and classification.

An EMR of 1.0 is average. Below 1.0 means you have fewer or less severe claims than expected, and you'll receive a premium discount. Above 1.0 means you have more or worse claims than expected, and you'll pay a premium surcharge.

Your EMR can have a dramatic impact on your costs. A business with an EMR of 0.75 pays 25% less than average, while one with an EMR of 1.5 pays 50% more. This experience rating gives you direct financial incentive to maintain a safe workplace and manage claims effectively.

Payroll and Premium Calculation

Your workers' compensation premium is calculated as a rate per $100 of payroll for each classification code. The rate varies by classification, and your total payroll (subject to certain caps for high earners) determines your premium.

This is why workers' comp costs increase as your business grows. More employees and higher payroll mean higher premiums, even if your rates and EMR stay the same.

During the policy period, you typically pay an estimated premium based on projected payroll. At the end of the policy term, the carrier audits your actual payroll, and you either owe additional premium or receive a refund based on the difference between estimated and actual payroll.

For more insights on managing business insurance costs, see why small businesses need a BOP policy .

The Claims Process: What Happens When an Employee Gets Injured

Understanding the claims process before an injury occurs helps you respond appropriately and manage costs when something does happen.

Immediate Response Steps

When an employee reports a work-related injury, your immediate response is critical. Provide or authorize first aid if needed. Ensure the employee receives appropriate medical attention. And document everything.

California law requires you to provide the injured employee with a claim form (DWC-1) within one working day of learning about the injury. The employee completes their portion, and you complete yours. You then send it to your insurance carrier within one working day of receiving the employee's completed section.

You're also required to provide injured employees with information about their rights and the claims process. Your workers' compensation insurance carrier should provide these materials.

Medical Provider Networks

Most California workers' compensation policies include medical provider networks (MPNs). If your policy has an MPN, injured employees must generally receive treatment from providers within that network, except in emergencies or under certain circumstances.

Directing employees to network providers helps control medical costs while ensuring quality care. Make sure your employees know about your MPN before injuries occur.

Your Role During the Claim

Your job is to cooperate with the claims investigation, provide accurate information about the injury and the employee's job duties, and maintain appropriate communication with both the insurance carrier and the employee.

What you shouldn't do: discourage employees from reporting injuries, retaliate against employees for filing claims, or interfere with their medical treatment. These actions are illegal and can result in serious penalties.

Penalties for Non-Compliance: Don't Risk It

California doesn't mess around with workers' compensation violations. The penalties are designed to be severe enough that compliance is always cheaper than taking the risk.

Criminal Penalties

Operating without required workers' compensation insurance is a criminal offense in California, punishable by up to one year in county jail, fines up to $10,000, or both. For larger employers or repeat offenders, these penalties increase substantially.

Civil Penalties

The Uninsured Employers Benefits Trust Fund (UEBTF) assesses penalties for illegally uninsured employers. These penalties can include:

A penalty assessment of up to twice the amount the employer would have paid in workers' compensation premiums during the period of non-compliance, with a minimum of $10,000.

The employer remains liable for all benefits the injured employee receives through the UEBTF, plus additional penalties.

Stop-Work Orders

If the Division of Workers' Compensation discovers you're operating without required coverage, they can issue a stop-work order, immediately prohibiting all business operations until you provide proof of coverage and pay penalties. Your business operations halt entirely until you comply.

Real Financial Impact

A single workers' comp claim without insurance can easily reach $100,000 or more when you factor in medical costs, disability payments, legal fees, and penalties. A serious injury could cost several times that amount.

The annual premium for workers' compensation—even for higher-risk industries—is a fraction of what one uninsured claim would cost. The financial math overwhelmingly favors compliance.

Finding the Right Workers' Compensation Coverage

Not all workers' compensation policies are created equal, and the carrier you choose affects both your costs and your claims experience.

What to Look for in a Carrier

Financial strength: Workers' compensation claims can remain open for years. You need a carrier with the financial stability to pay ongoing claims long into the future.

Claims service: How does the carrier handle claims? Do they have adjusters who specialize in your industry? What's their reputation for working with injured employees and getting them back to work?

Loss control services: Quality carriers provide safety resources, training, and workplace assessments to help you prevent injuries. These services save money by reducing claims frequency and severity.

Premium competitiveness: Rates vary among carriers, even for the same classification codes. An independent agent can compare multiple carriers to find competitive pricing.

The State Compensation Insurance Fund

California operates a state fund (State Comp) that serves as the insurer of last resort. If you can't find coverage in the private market—often because of claims history or high-risk operations—State Comp is required to provide coverage.

State Comp rates are often higher than private market options, and service may be less personalized. Most businesses are better served by securing coverage through the private market when possible.

Working with an Independent Agent

Because workers' compensation pricing and coverage vary significantly among carriers, working with an independent agent who can compare multiple options provides substantial advantages.

An independent agent can:

Ensure your employees are classified correctly for rating purposes. Help you understand your EMR and how to improve it. Shop your coverage among multiple carriers at renewal. Provide guidance on claims management and loss control. Advocate for you if disputes arise with carriers.

At Hall, Mahar & Associates Insurance Services, Inc, we specialize in commercial insurance solutions for California businesses, including workers' compensation coverage. Our independent agency status allows us to find the right carrier and coverage structure for your specific business needs.

Reducing Your Workers' Compensation Costs

While you can't avoid the requirement to carry coverage, you can take steps to minimize your costs over time.

Implement a Safety Program

The single most effective way to reduce workers' comp costs is to prevent injuries in the first place. A formal safety program that includes regular training, hazard identification, and incident investigation reduces both claim frequency and severity.

Documented safety programs also improve your experience modification rate over time, directly reducing your premiums.

Return-to-Work Programs

Getting injured employees back to work quickly—even in modified or light-duty positions—reduces claim costs substantially. Prolonged time away from work increases both disability payments and the psychological barriers to returning.

A formal return-to-work program demonstrates to your insurance carrier that you actively manage claims, which can positively influence both your EMR and your ability to secure competitive coverage.

Manage Claims Actively

Report claims promptly, maintain communication with injured employees, and work cooperatively with your insurance carrier's claims team. Claims that are well-managed from the start typically resolve more quickly and cost less than claims that become adversarial.

Review Your Classifications and Audit

Make sure your employees are classified correctly. Misclassification in either direction causes problems—either overpaying for coverage or facing large audit bills and penalties.

Maintain accurate payroll records and review your audit carefully each year. Errors happen, and catching them early saves money and frustration.

Taking Action: Protecting Your Business and Your Employees

Workers' compensation is non-negotiable in California. If you employ others, you need coverage. The question isn't whether to carry it, but how to get the right coverage at the best possible cost while protecting both your employees and your business.

If you're starting a business and hiring your first employee, get coverage in place before that employee starts work. If you're running an established business, review your current coverage to ensure your classifications are correct, your limits are adequate, and your premium is competitive.

Don't wait until an injury happens to discover that your coverage is inadequate or that you've been misclassifying employees. A proactive approach to workers' compensation protects everyone involved.

Ready to review your California workers' compensation coverage or get a quote for a new policy? Call Hall, Mahar & Associates Insurance Services, Inc or request a quote online . We'll help you understand your obligations, find competitive coverage, and implement strategies to manage your costs over time. Check out our Google reviews to see how we've helped other California business owners navigate their insurance needs.

Frequently Asked Questions

Do I need workers' compensation if my only employee is a family member?

Yes. California requires workers' compensation coverage for all employees, including family members on your payroll. The only exceptions are specific ownership positions, such as sole proprietors, some partners, and certain corporate officers meeting specific criteria. If your family member is a W-2 employee, they must be covered.

What happens if an independent contractor I hire gets injured?

If the person is a true independent contractor under California's ABC test, they're responsible for their own insurance coverage and you generally have no liability. However, if the state later determines they were misclassified and should have been an employee, you could be held liable for benefits plus significant penalties. Many businesses require independent contractors to carry their own workers' comp or general liability insurance and provide proof of coverage.

Can I require employees to sign waivers saying they won't file workers' compensation claims?

No. Such waivers are invalid and unenforceable in California. Employees cannot waive their right to workers' compensation benefits, and attempting to require them to do so is illegal. All employees have the absolute right to file workers' compensation claims for legitimate work-related injuries.

How long do I need to keep workers' compensation records?

California requires employers to maintain workers' compensation records for at least five years. This includes injury reports, claim forms, correspondence with the insurance carrier, and documentation of any workplace incidents. Keeping thorough records protects you during audits and if disputes arise about claims.

Will my business insurance cover workers' comp, or do I need a separate policy?

Workers' compensation requires a separate, dedicated policy in California. It's not included in general liability insurance, business owners policies, or other commercial coverage. Some insurers offer package policies that include multiple coverages, but workers' comp is always a distinct coverage with its own premium calculation, requiring specific policy forms and compliance with state regulations.

Independent vs. Captive Agents: Why the Difference Matters

Tue, 13 Oct 2026 03:15:17 GMT

Two Types of Insurance Agents, Two Very Different Experiences

When you're shopping for insurance, the agent you choose matters just as much as the coverage itself. But here's something most people don't realize until after they've already committed: not all insurance agents work the same way. The difference between an independent agent and a captive agent fundamentally changes what options you'll see, how much you'll pay, and whether you're getting the coverage that actually fits your needs.

A captive agent represents one insurance company. An independent agent represents you and works with multiple carriers. That distinction sounds simple, but it affects every interaction you'll have, every quote you'll receive, and every claim you'll file.

If you've ever wondered why your neighbor got a better rate, or why your cousin raves about their agent while you feel stuck with limited options, the answer often comes down to which type of agent they're working with.

What Exactly Is a Captive Agent?

A captive agent works for a single insurance company. They sell that company's products exclusively. Think of the big names you see advertised everywhere—those friendly representatives in commercials talking about their specific brand. Those are captive agents.

How Captive Agents Operate

Single-carrier relationship: Captive agents have a contract with one insurance company. They receive training, marketing support, and often office space from that carrier. Their job is to sell that company's policies.

Brand loyalty: They become experts in their carrier's specific products, underwriting guidelines, and claims processes. They can answer detailed questions about that company's offerings because that's all they work with.

Limited flexibility: If their company's rates aren't competitive for your situation, or if their underwriting guidelines don't work well for your particular risk, a captive agent has no alternative to offer you. You either take what they have or go somewhere else.

Company compensation: Captive agents earn commissions from their carrier, but they're also subject to company goals, quotas, and performance metrics tied to a single insurer's priorities.

When Captive Agents Make Sense

Captive agents aren't inherently bad. For some people in specific situations, they work fine. If you have straightforward insurance needs, a clean driving record, standard home construction, and you happen to fit perfectly into that company's preferred customer profile, you might get competitive rates from a captive agent.

Some captive carriers offer strong brand recognition, solid claims service, and established reputations. If you've been with the same company for years and you're satisfied with both price and service, there's no urgent reason to switch just because your agent is captive.

But here's the catch: you'll never know if you're getting the best available option because you're only seeing one.

Understanding Independent Insurance Agents

An independent agent works for you, not an insurance company. They hold contracts with multiple carriers—sometimes dozens—and they can quote your coverage across all of them to find the best fit for your specific situation.

How Independent Agents Operate

Multi-carrier access: Independent agents can place your coverage with whichever carrier offers the best combination of price, coverage, and service for your particular needs. That might be a different carrier for your personal insurance than for your commercial insurance .

Market leverage: When renewal time comes and your rates increase, an independent agent can shop your coverage to other carriers without you having to start the process over with a new agent.

Unbiased advice: Independent agents aren't pushing any single company's products. They're paid regardless of which carrier you choose, so their incentive aligns with finding you the right coverage, not meeting a corporate quota.

Relationship continuity: If you move or your needs change, your independent agent stays your agent. The carrier might change, but your advisory relationship continues.

Problem-solving flexibility: When you have a unique situation—a home-based business, a teen driver with a blemish on their record, or property that doesn't fit standard underwriting—an independent agent has multiple paths to find coverage instead of just one "no."

The Independent Agency Advantage

The real advantage shows up in three scenarios: when you're shopping for coverage, when your situation changes, and when something goes wrong.

When shopping, you get multiple quotes from one conversation instead of calling five different agents and repeating your information each time. An independent agent does that legwork for you.

When your situation changes—you start a business, buy a rental property, or add a young driver—your independent agent already knows your entire insurance picture and can adjust coverage across carriers seamlessly.

When something goes wrong, you have an advocate who isn't employed by the company that just denied your claim or raised your rates. Your independent agent works for you to find solutions, not to protect a single carrier's bottom line.

The Real-World Impact: Side-by-Side Scenarios

Let's look at how these two agent types handle common situations differently.

Scenario: Your Insurance Renewal Increases 20%

Captive agent response: They explain that rates went up across the board due to increased claims in your area. They might review your discounts and deductibles to see if adjusting coverage could lower the premium, but you're staying with that same carrier regardless.

Independent agent response: They shop your coverage to multiple carriers, compare the proposals, and potentially move you to a different insurer with better rates for your profile. You might end up paying less than before the increase, with the same or better coverage.

Scenario: You're Starting a Small Business from Home

Captive agent response: They check whether their carrier offers a home business endorsement and what it costs. If their carrier doesn't offer what you need or prices it prohibitively, they'll suggest you call a commercial agent somewhere else.

Independent agent response: They quote multiple carriers for both a home business endorsement and a separate business owners policy, compare coverage and pricing, and help you understand which approach works better for your specific business type. If you need more than one policy, they coordinate everything.

Scenario: Your Teen Just Got Their License

Captive agent response: They add your teen to your existing policy and give you the new premium. If it's shockingly high, they might suggest a higher deductible or removing some coverage to lower costs, but you're limited to how that one carrier rates young drivers.

Independent agent response: They compare how different carriers rate teen drivers, since some are significantly more competitive than others for young drivers. They might find a carrier that offers better multi-policy discounts or has more favorable underwriting for students with good grades. The savings could be hundreds of dollars annually.

You can read more about managing auto insurance costs in our guide on ways to lower your auto insurance premium.

What About Direct-to-Consumer Insurance Companies?

There's a third option that's gained popularity: buying insurance directly from a company online or over the phone, with no agent at all. These direct-to-consumer carriers advertise heavily and promise convenience and savings.

Here's what you give up: personalized advice, coverage review, someone to advocate for you during claims, and any kind of proactive service. You're on your own to understand policy language, choose appropriate limits, and navigate the claims process if something happens.

Direct insurance works for people who are confident in their ability to assess their own coverage needs, comfortable managing everything themselves, and primarily focused on price above all other factors.

But there's no one checking whether you have the right coverage, no one calling when you might qualify for new discounts, and no one in your corner if a claim gets complicated. You save the commission cost, but you also lose the expertise and advocacy.

For most people, especially those with multiple policies, significant assets, or complex situations, the value an agent provides—particularly an independent agent—far exceeds the potential savings from going direct.

The Cost Question: Do You Pay More for Independent Agents?

This is the question everyone wants answered: does working with an independent agent cost more than a captive agent?

The short answer: no. Insurance premiums are determined by the carrier, not the agent. The commission is built into the premium structure regardless of whether the agent is captive or independent. You don't pay extra to work with an independent agent.

In fact, you often pay less because the independent agent can find you a better rate by shopping multiple carriers. The commission they earn is the same percentage whether you pay $1,000 or $2,000 annually, so they have no financial incentive to place you with a more expensive carrier.

The value difference is the service and access you receive, not the price you pay.

Making the Switch: What If You're Already with a Captive Agent?

You're not stuck. Insurance policies renew annually (or semi-annually), and you can change agents and carriers at any time. There's no penalty for switching, and you don't owe your current agent anything beyond common courtesy.

The process is straightforward: contact an independent agent, provide your current policy information, and let them shop your coverage. If they find better options, they'll handle the transition, coordinate effective dates, and ensure you maintain continuous coverage without gaps.

Many people hesitate to switch because they've been with the same agent or company for years and feel some sense of loyalty. That's understandable, but remember: insurance companies regularly raise rates, change underwriting guidelines, and adjust their preferred customer profiles. They're not staying loyal to you just because you've been a customer for a decade. They're charging you what their current algorithms say you should pay.

You should make insurance decisions based on value, coverage, and service—not guilt or inertia.

How to Identify a Quality Independent Agent

Not all independent agents offer the same level of service or carrier access. Here's what to look for:

Multiple carrier relationships: Ask how many carriers they represent. A dozen or more is ideal, covering different market segments and specialties.

Experience and expertise: How long have they been in business? Do they hold professional designations or specialized licenses? Industry experience matters when coverage gets complicated.

Local presence: Working with a local independent agent who understands your state's regulations and regional risks provides advantages over a distant call center.

Service philosophy: Do they explain coverage in terms you understand? Do they proactively review your policies, or do you only hear from them at renewal? The relationship should be advisory, not transactional.

Technology balance: They should offer convenient online access to policy documents and information, but also provide real human contact when you need to discuss something complex or file a claim.

At Hall, Mahar & Associates Insurance Services, Inc, we work with multiple carriers to provide California residents with comprehensive insurance solutions across personal and business needs. Our independent status means we're always looking for your best option, not pushing any single company's products.

The Bottom Line: Which Type of Agent Is Right for You?

For the vast majority of people, an independent agent provides more value, better options, and stronger advocacy than a captive agent or going direct to a carrier.

The independent agency model aligns the agent's interests with yours. They succeed when they find you the right coverage at competitive prices and provide service that keeps you as a client for years. They're not measuring success by how many policies they sold for a specific insurance company this quarter.

The exceptions are few: if you have extremely simple needs, you've already confirmed you're getting competitive rates by shopping around, and you're satisfied with your service, then staying with a captive agent who's serving you well is perfectly reasonable.

But if you've never had your coverage shopped across multiple carriers, if your rates have increased significantly, if you're not completely confident about your coverage adequacy, or if you're tired of being told "that's just what we offer" when you ask questions, it's time to talk to an independent agent.

You might discover you've been overpaying for years. You might find out you have coverage gaps that could prove financially devastating. Or you might confirm that you're in good shape and getting fair value. Any of those outcomes is worth a conversation.

The insurance landscape is competitive, complex, and constantly changing. Having an expert in your corner who can navigate all of it on your behalf isn't just convenient—it's one of the smartest financial decisions you can make.

Ready to see what your options look like with an independent agent? Request a quote from Hall, Mahar & Associates Insurance Services, Inc, or call us to discuss your coverage needs. We'll show you exactly what the independent agency difference means for your specific situation. See what our clients say about working with us on Google .

Frequently Asked Questions

Can an independent agent offer me the same insurance companies as captive agents?

Yes, in many cases. Independent agents often have contracts with the same major carriers that employ captive agents, plus dozens of additional carriers that only work through independent agents. This gives you access to both the well-known brands and specialized carriers you wouldn't find through captive agents or direct-to-consumer channels.

Will I pay higher premiums working with an independent agent?

No. Insurance premiums are set by the carrier based on their underwriting criteria and rate filings, not by the agent. Agent commissions are built into the premium structure regardless of whether the agent is captive or independent. You typically pay the same premium or less with an independent agent because they can shop multiple carriers to find better rates.

What happens to my policies if I switch from a captive agent to an independent agent?

Your independent agent will shop your coverage across their carrier partners, present you with options, and if you choose to switch, they'll coordinate the cancellation of your old policies and the effective dates of new ones to ensure continuous coverage. You maintain control throughout the process and only switch if you find better value elsewhere.

Do independent agents have access to all insurance companies?

No agent—captive or independent—has access to every insurance company. Some carriers only work through captive agents, while many others only work through independent agents. A quality independent agency typically has relationships with 15 to 30 or more carriers, covering different market segments and needs, which provides extensive options for most situations.

How do independent agents get paid if they represent multiple companies?

Independent agents earn commissions from whichever carrier underwrites your policy. Each carrier pays a percentage of your premium as commission. The agent's compensation is built into the rate structure and doesn't affect what you pay. Because they're paid by multiple carriers, their incentive is to find you the best fit, not to push any particular company's products.

Earthquake Insurance in California: Do You Really Need It?

Tue, 13 Oct 2026 03:15:16 GMT

Understanding Earthquake Risk in the Golden State

You've felt the occasional tremor. Maybe you've stocked up on emergency supplies or bolted your water heater to the wall. But have you actually looked into earthquake insurance? Most California homeowners haven't, and that's a problem because here's what many people don't realize: your standard homeowners policy doesn't cover earthquake damage. Not a single crack in the foundation, not a collapsed chimney, not the thousands of dollars it might cost to make your home livable again.

California sits on multiple active fault lines, and seismologists consistently remind us that a major earthquake isn't a question of if, but when. The 1994 Northridge quake caused over $20 billion in damage. The 1989 Loma Prieta earthquake disrupted the entire Bay Area. These aren't ancient history—they're recent reminders that earthquake risk is real across the state.

The question isn't whether earthquakes happen here. They do. The real question is whether the cost of earthquake insurance makes sense for your specific situation, your home's construction, your location, and your financial capacity to rebuild without it.

What Your Homeowners Insurance Actually Covers (and Doesn't)

Let's clear up the biggest misconception first. Your standard homeowners insurance policy excludes earthquake damage. It's written right into the policy language. That beautiful home you've invested in? If an earthquake damages it, you're covering repairs out of pocket unless you've purchased separate earthquake coverage.

Here's what is covered by your regular policy:

Fire damage: If an earthquake causes a fire (say, from a broken gas line), your homeowners policy typically covers the fire damage itself—not the earthquake damage that caused it.

Water damage exceptions: Similarly, if earthquake damage causes a water pipe to burst, some policies might cover resulting water damage, but not the structural damage that broke the pipe in the first place.

What's not covered without earthquake insurance:

Structural damage: Cracked foundations, collapsed walls, damaged framing—all excluded from standard policies.

Personal property: Your furniture, electronics, and belongings damaged in a quake aren't covered either.

Additional living expenses: If your home becomes uninhabitable, you'll pay for temporary housing yourself.

The gap between what homeowners think they have and what they actually have can be financially devastating. We've talked to countless California residents who assumed they were protected, only to discover the truth when reviewing their coverage options.

How Earthquake Insurance Actually Works

Earthquake insurance in California operates differently than your typical homeowners policy. Understanding these differences helps you make an informed decision about whether it fits your needs.

The California Earthquake Authority

Most earthquake policies in California come through the California Earthquake Authority (CEA), a publicly managed, privately funded organization created after insurers started pulling out of the earthquake insurance market in the 1990s. The CEA works with participating insurance companies to offer standardized earthquake coverage to homeowners, renters, and condo owners.

Private insurers also offer earthquake policies outside the CEA, sometimes with more flexible coverage options but often at higher premiums.

Coverage Structure and Deductibles

Here's where earthquake insurance gets tricky. The deductibles are high—really high. We're talking 10% to 25% of your home's insured value, not the few hundred or thousand dollars you might pay for a homeowners claim.

What this means: if your home is insured for $500,000 and you have a 15% deductible, you'll pay the first $75,000 of earthquake damage yourself. The insurance kicks in after that threshold. This isn't coverage designed for minor damage. It's catastrophic coverage for the worst-case scenario.

Coverage typically includes:

Dwelling coverage: Repairs to your home's structure up to policy limits.

Personal property coverage: Usually 10% of your dwelling coverage for contents, but you can purchase more.

Loss of use: Temporary living expenses, though with caps and limitations.

Building code upgrades: Some policies include coverage for mandatory updates required when rebuilding.

What's Excluded Even with Earthquake Insurance

Even with earthquake coverage, some items remain excluded or limited:

Masonry chimneys often have limited coverage. Pools, patios, and driveways may not be fully covered. Detached structures might require additional coverage. And that high deductible applies to everything—you can't pick and choose.

The Real Cost of Earthquake Insurance

Let's talk numbers. Earthquake insurance premiums in California vary dramatically based on several factors, and the range might surprise you. Annual premiums can run anywhere from $800 to $5,000 or more, depending on your specific situation.

What Drives Your Premium

Location matters most: A home near the San Andreas Fault pays significantly more than one in a lower-risk area. Proximity to active fault lines is the primary rating factor.

Construction type: Wood-frame homes generally cost less to insure than brick or masonry structures, which are more vulnerable to earthquake damage. Homes built after 1980 often qualify for lower rates due to improved building codes.

Home value: Higher replacement costs mean higher premiums. Your insured amount directly impacts what you'll pay.

Retrofit status: If you've retrofitted your home with foundation bolting or cripple wall bracing, you might qualify for discounts of 20% or more.

Deductible choice: Opting for a higher deductible (20% versus 10%) lowers your premium but increases your out-of-pocket risk.

A single-story, wood-frame home built in 1985 in a moderate-risk area might pay $1,200 annually with a 15% deductible. That same home closer to a major fault line could easily pay $3,000 or more. An older unreinforced masonry building? The premium could be prohibitively expensive, if coverage is even available.

Making the Decision: Do You Actually Need It?

This is where you need to get honest with yourself about your financial situation and risk tolerance. There's no universal right answer, but there are smart ways to think through the decision.

You Should Strongly Consider Earthquake Insurance If:

You couldn't afford to rebuild your home out of pocket. If a total loss would financially devastate you, earthquake insurance provides essential protection despite the high cost and deductibles.

You carry a mortgage. Some lenders require it, but even if yours doesn't, consider that you'd still owe the full mortgage balance even if your home is destroyed.

Your home is your primary asset. If most of your net worth is tied up in home equity, protecting that investment makes sense.

You live near active fault lines. Higher risk justifies higher premiums when the probability of a significant earthquake increases.

You have an older home. Pre-1980 construction faces greater vulnerability, especially homes that haven't been retrofitted to modern standards.

You Might Skip It If:

You have substantial liquid savings. If you could write a check for $200,000 to $400,000 tomorrow to rebuild, you might self-insure instead.

Your home is paid off and represents a small portion of your net worth. Some wealthy homeowners choose to accept the risk rather than pay ongoing premiums.

You're in a genuinely lower-risk area. Some parts of California face minimal earthquake risk, though nowhere in the state is completely safe.

You can't afford both the premium and the deductible. If paying the annual premium strains your budget and you couldn't come up with a $50,000+ deductible anyway, the coverage might not function effectively for you.

Alternatives and Risk Reduction Strategies

Deciding against earthquake insurance doesn't mean ignoring earthquake risk. Several strategies can reduce your vulnerability and potential losses.

Retrofit Your Home

Foundation bolting and cripple wall bracing represent the two most cost-effective retrofits for earthquake protection. Many California cities and counties offer retrofit programs with rebates ranging from $3,000 to $7,000 or more. The work typically costs $3,000 to $8,000, making it accessible for many homeowners.

Retrofitting won't prevent all damage, but it significantly reduces the chance of catastrophic structural failure. Your home is far more likely to remain standing and habitable after a major quake if it's properly secured to its foundation.

Build an Emergency Fund

If you're self-insuring against earthquake risk, you need liquid savings to back up that decision. Financial advisors suggest setting aside enough to cover both your deductible (if you had coverage) plus additional funds for immediate repairs and temporary housing.

A realistic emergency fund for earthquake self-insurance might range from $30,000 to $100,000 or more, depending on your home's value and your risk tolerance. That's a big number, but it's what actual self-insurance looks like.

Consider a Parametric Insurance Policy

Some newer insurance products offer parametric coverage, which pays out a predetermined amount based on earthquake magnitude and your distance from the epicenter—regardless of actual damage. These policies typically have lower premiums and no deductibles, though they also have lower coverage limits. They're designed to provide quick cash for immediate needs rather than full rebuilding costs.

Maximize Your Homeowners Coverage

While your homeowners policy won't cover earthquake damage, make sure you have adequate coverage for the perils it does cover. Replacement cost coverage and sufficient dwelling limits ensure you're protected against the risks that are covered.

At Hall, Mahar & Associates Insurance Services, Inc , we work with multiple carriers to help California homeowners find the right balance of coverage and cost across all their insurance needs.

State Resources and Assistance Programs

California offers several resources for homeowners evaluating earthquake risk and insurance options:

The California Earthquake Authority website provides premium calculators, risk maps, and detailed information about coverage options. You can get a quote directly through participating insurers.

The California Residential Mitigation Program (CRMP) offers grants and resources for seismic retrofitting through participating local governments.

Earthquake Brace + Bolt is a statewide program providing up to $3,000 for eligible homeowners in high-risk zip codes to retrofit their homes.

Your local building department can provide information about your home's construction type, age, and whether it meets current seismic building codes—all factors that impact both your risk and your insurance options.

Taking Action: Next Steps for California Homeowners

Whether you decide to purchase earthquake insurance or not, taking some action is better than ignoring the risk entirely. Here's a practical approach:

Get an actual quote. Don't guess about costs. Contact your insurance carrier or an independent agent for real numbers based on your specific home and location. You might be surprised—either by how affordable or expensive it actually is.

Have your home inspected for seismic vulnerabilities. A professional can identify specific risks and recommend targeted retrofits that offer the most protection for your investment.

Review your complete insurance portfolio. Make sure you understand exactly what's covered and what isn't across all your policies. This includes your homeowners, understanding what homeowners insurance actually covers , auto, and any umbrella policies you carry.

Create a written emergency plan. Whether or not you buy coverage, you need a plan for what you'd do after a significant earthquake. Where would you stay? How would you access emergency funds? Who would you contact for repairs?

The decision about earthquake insurance is personal and financial. There's no shame in choosing either direction, as long as you're making an informed choice based on your actual situation rather than assumptions or avoidance.

If you're ready to explore your options or have questions about how earthquake insurance fits into your overall coverage strategy, our team can walk you through the specifics for your home. Call Hall, Mahar & Associates Insurance Services, Inc or request a quote online to review your California home insurance options. You can also see what our clients say about us on Google .

Frequently Asked Questions

Does homeowners insurance cover any earthquake damage at all?

Standard homeowners insurance excludes earthquake damage entirely, including structural damage and personal property losses. However, fire damage caused by an earthquake is typically covered under the fire provision of your homeowners policy, though not the earthquake damage that caused the fire. This distinction matters because fires following earthquakes are common.

Why are earthquake insurance deductibles so much higher than other insurance?

Earthquake deductibles range from 10% to 25% of your dwelling coverage because earthquakes are catastrophic events that can cause widespread, simultaneous damage to thousands of properties. Insurers use high deductibles to keep premiums affordable while protecting themselves against massive claim volumes. The coverage is designed for worst-case scenarios, not minor damage.

Can I buy earthquake insurance right before a predicted earthquake?

While you can purchase earthquake insurance at any time, policies typically include a 30-day waiting period before coverage takes effect. You can't buy coverage immediately before or after a significant earthquake and expect it to cover that event. The time to purchase is before the shaking starts.

Are condos and renters covered differently for earthquakes?

Condo owners need earthquake insurance specifically designed for condos, which covers interior improvements, personal property, and their share of building coverage. Renters can purchase earthquake insurance covering personal belongings and additional living expenses, typically at much lower premiums than homeowners pay since they're not insuring the structure itself.

How does earthquake insurance work if my mortgage lender requires it?

If your lender requires earthquake insurance (less common than you might think), they'll specify minimum coverage amounts in your loan documents. You'll need to maintain the policy continuously and provide proof of coverage. However, most California mortgage lenders don't require earthquake insurance, unlike flood insurance in designated flood zones.

The Power of Your Local Independent Insurance Agency

Wed, 27 Nov 2019 19:15:00 GMT

Here are three things that make Hall, Mahar & Associates your best resources for getting the right protection.

Expertise – with over 50 years of service, we have expertise in working with insurance carriers to get the right protection for our clients.

Knowledge – representing multiple carriers gives us the ability to provide options for our clients, options mean we can shop carriers to identify the best protection for your budget.

Guidance – our job is to leverage our expertise and knowledge to guide our clients down the path of making the best decision in getting the right protection .

3 Generations of High Quality Glasswork…

Thu, 01 Aug 2019 18:05:00 GMT

To learn more about ECO Glass Systems or to request a bid on an upcoming project, just click here .

Massage Matters… Changing Lives

Tue, 02 Jul 2019 21:21:00 GMT

Click here to learn more about Massage Matters or to schedule your first session.

Circle City Hot Rods

Fri, 31 May 2019 17:47:00 GMT

Like most greats, Jimmy’s passion and talent are driven by his childhood fascination with hot rods. “I just started out restoring cars with my buddies, and it’s evolved into an amazing 17-year run (and counting) in business. We’ve been fortunate to work on some very cool restoration projects. We have clients that come to us from all over the world with their hot rod vision, and we work hard to bring it to life.”

An Umbrella Doesn’t Just Protect You From The Rain…

Mon, 29 Apr 2019 23:16:00 GMT

You guessed it… it comes from you, the insured. In this situation, the insurance carrier wrote checks ($300k and $50k) for bodily injuries and damages, the rest of the money was the responsibility of our client. These types of accidents happen all the time and insureds aren’t aware of exposure to their assets until the claims come and the lawsuits begin.

Click here to learn more about umbrella insurance or to get a quote.

Emerging O.C. Construction Company

Tue, 23 Apr 2019 00:05:00 GMT

FullSwing is an emerging construction company in Orange County that specializes in residential and commercial construction. Their approach to construction is refreshing and forward thinking. With every job being a reflection of the business, their attention to details, and commitment to quality makes FullSwing a top choice. “It’s not that we’re doing anything so unique, we just stick to the fundamentals of doing good business. Be passionate about what you do, treat people like you want to be treated, and give your best on every job like it’s your last.” – James Endsley, President

From home additions, remodels, and complete commercial build-outs, FullSwing is a trusted company to meet and exceed your expectations. To learn more about FullSwing Construction, just click the logo.

Man owes $1,000 for dancing like MC Hammer

Sat, 30 Mar 2019 23:46:00 GMT

As I jumped and landed after a signature Hammer move, my foot popped like a carrot being snapped in half. It hurt, but I kept dancing, I couldn’t let my wife know that I was injured from dancing. As it turns out, I fractured my fourth metatarsal (the toe next to the pinky-toe).

I guess the moral to the story is, if you’re old and trying to be young, you better have an accident insurance policy. Your wallet may need the protection for the moment your body reminds you of the truth.

The above graphic is an image of the actual check I received from the carrier.

5 Strategies for Life Insurance

Fri, 08 Mar 2019 17:35:00 GMT

Most Americans think that buying life insurance is a good idea. However, very few Americans take advantage of their window of opportunity to get the protection that secures their family’s financial future.

Just for a moment, I want you to imagine your family’s life without you. What debts would you leave behind? How would your family live? Where would they get money from to them deal with losing you?

Life insurance has always been designed to be a part of a strategy

Life insurance has always been designed to be a part of a strategy to support a family’s ability to continue financially in the event of a loss. The income tax-free benefit from life insurance creates an “instant estate” providing money for your family to continue working toward the dreams that you shared in the event of your death.

Here are the top 5 things peoples do with money from life insurance:

Pay off mortgage and debts
Replace the income of the deceased family member
Pay medical and/or funeral costs
Fund education for surviving family members
Leave an inheritance for children and grandchildren

All these things are meaningful and can be accomplished when the right type of policy is in place to protect your family.

Money could never replace the loss of your life

Every day families are making decisions to try and improve their quality of life without ever considering life insurance as part of their plan. We know that money could never replace the loss of your life, but it can provide the financial support your family would need to continue with life, the way you would want them to.

Protecting the future of the ones you love

The people who depend on you for their everyday existence also depend on you to protect their financial future. The top 5 things on this list are not just for wealthy families to be able to do, it’s something that all families can do. Life insurance is not a mere policy you pay for, it is an investment in making sure your families financial future remains secure in the event of your death.

To make sure your loved ones have the security they deserve. Click here to learn about the 2 categories of insurance policies that exist to support your family’s financial needs.

We are HMA Insurance, we believe in being there for people in their time of need. We accomplish this through insurance products that help us provide the financial protection our clients need and deserve .

Having The Life Insurance Talk

Fri, 08 Mar 2019 02:30:00 GMT

Life insurance is one of the most important policies a household can have, it provides financial protection to the loved ones we leave behind. W e’ve put together this brief checklist to assist you in clarifying your families financial needs in the event of your death. We hope these questions begin a conversation that guides you in determining if Life Insurance is right for your family.

Why do we need life insurance?
What are we trying to accomplish by purchasing a life insurance policy?
Which one of us are we considering life insurance for?
How much insurance do we need to make sure there’s a strong financial foundation in place for the family?
How many years would we need the protection in place for?
Would need replacement income to allow enough time to grieve before returning back to work?
Would we want a plan that covers a set period of time or a permanent plan that accumulates cash?
Who would be the beneficiaries on the policy?
Should we have a policy for the children for burial expenses?
How would we make it if we didn’t get life insurance?

If you have more specific questions, we are always willing to assist you. You can click here to submit your questions to a representative.

Your Life Insurance Options

Fri, 08 Mar 2019 02:28:00 GMT

Many Americans express that they don’t bother getting life insurance because it’s too complicated to understand all the options. This information is intended to provide a general understanding of the two categories of life insurance products. For more detailed product information, it is recommended that you contact one of our licensed life insurance agents.

With that said, there are two major categories of life insurance— term and permanent . There are subcategories within both types, but for the sake of this overview, we will focus on the major categories.

Term Life Insurance

Term life is insurance that covers you for a specific “term” (period of time). It is the simplest form of life insurance. It pays a death benefit only if death occurs during the term of the policy, which can be up to 40 years. Most term policies have no other benefit provisions.

These are the key benefits of term life insurance:

Level premium , meaning your rate doesn’t increase as you age with the policy.
Level death benefit , meaning that the death benefit stays the same throughout the duration of the policy.
Affordable premiums , meaning premiums for term life insurance are typically lower than permanent life insurance policies.

Permanent Life Insurance

Permanent life is insurance that can cover you for your entire life. It pays a death benefit whenever you die—even if you live to 100 or beyond! The policy remains in force, as long as premiums are being paid.

These are the key benefits of permanent life insurance:

Permanent death benefit , meaning the policy provides protection for as long as the insured lives
Builds cash value , meaning the policy accrues cash value that can be paid out to the policyholder in addition to the policy’s death benefit. These types of policies are desirable because they act as a “tax-deferred” savings plan for the insured.
Flexibility , meaning that there are different types of permanent policies that provide the flexibility to adjust the policy as your needs change while insured.

If you would like more detailed information regarding the different types of policies, you can click here to request a consultation with a licensed life insurance agent.

We are HMA Insurance, and we believe in being there for people in their time of need. We accomplish this through insurance products that help us provide the financial protection our clients need and deserve.

Daughter Gets Injured, Parents Get $10,000

Wed, 27 Feb 2019 22:59:00 GMT

On January 13th, 2018 our daughter Ellie was injured playing in a softball tournament. The play that caused the injury didn’t look too bad, but after getting an MRI we found out that she had torn her ACL. We immediately called our agent to let him know our daughter had been injured and he helped with processing our claim.

My wife and I wanted to share our story because the policy was a real blessing in this situation. We took out the policy in August of 2017 because we see injuries in softball happening all the time. We were blown away that the policy worked exactly the way it was represented to us by our agent. The total charges for Ellie’s surgery came out to $19,029, our health insurance paid $15,907, so that left us with a bill for $3,122.

We submitted our claim on April 2nd after we received all the final medical bills. On April 16th we received a check in the mail for the full benefit maximum of $10,000 because the plan pays actual medical charges up to the maximum benefit. It was so easy to file a claim and the money came before our payment of $3,122 was due. We wanted to tell our story because to that point, we had only paid $207.04 in premiums ($25.88 a month) and we received a check for $10,000! This is an amazing policy and we are so grateful that our HMA Insurance agent encouraged us to get this protection for our daughters. “It seemed too good to be true”, but now I can say without a doubt, the policy worked exactly the way we hoped it would.

Click here to learn more about insurance products that provide money directly to you, in the event of an accident, illness, or loss of life.

Has Life Insurance Become A Joke?

Thu, 31 Jan 2019 17:08:00 GMT

Industry research has identified that there are real reasons that have made life insurance the last thing people think about. Here are just a few:

I’m young and healthy, I’ll get it when I’m older
I can’t afford to add-on another monthly payment
I’m too busy to go through the process of getting a policy
I don’t know enough about life insurance to make sure I’m not being taken advantage of

Although these are legit reasons, they shouldn’t keep you from taking advantage of your opportunity to financially protect your loved ones, in the event you leave them behind.

Here’s a story of one married couple.

So here is the truth – everyone knows they will die one day, they just don’t know when. Everyone knows that if you have people that depend on you financially, an untimely death could impact their ability to recover after you’re gone. Yet, people still take lightly the importance of life insurance.

At HMA Insurance, we are here to let you know that life insurance is not a joke! We recognize that there are households that would be fine without money from life insurance. However, for most Americans, the lump sum cash benefit from life insurance could be a game changer.

If this article speaks to you, we encourage you to take a simple step today by clicking, the first step . We would be happy to assist you in providing your loved ones the financial protection they need and deserve; so you can be sure they’ll have the quality of life you’d want them to have in your absence.

Coverage vs. Protection

Tue, 27 Nov 2018 21:28:00 GMT

This occurs all too often in our industry, finding out you’re underinsured at the time something happens. We understand the need to be penny-wise, but we are also familiar with the consequences of being pound-foolish. If you’re not sure you have the right protection for what matters most to you, then we would love an opportunity to review your policy to see if there’s something we can do to improve your protection.

At HMA Insurance, we believe in being there for people in their time of need.

Fire Claims

Fri, 16 Nov 2018 17:40:00 GMT

In addition, should you have any questions or concerns regarding your existing coverage in the event of a fire, we are more than happy to review your policy with you. You may contact us at 714-937-1500, let the customer service representative know you’d like to review your homeowner’s policy for fire protection.

Kemper Insurance

Call 1-888-252-2799. This number is active 24 hours day/7 days a week.
Online: www.kemper.com Please be sure to place Wildfire claim in the comments.

We hope that you and our policyholders are not affected by the wildfires, but we can assure you that the Kemper Claims Team is standing by to help our customers should any damage occur.

Mercury Insurance

Call 1-800-503-3724. This number is active 24 hours day/7 days a week.
Online: Mercury Insurance Claims

Mobile Claim Locations:

Hill and Woolsey Fires: Thousand Oaks Grant R. Brimhall Library

1401 E. Janss Rd., Thousand Oaks, CA 91362

Hours: 11/16 – 11/20, 9:00 am to 5:00 pm

Camp Fire : Butte County Fairgrounds (near the shelter)

199 E Hazel St. Gridley, CA 95948

Hours 9:00am to 5:00pm (until further notice)

Safeco Insurance

Call 1-800-332-3226. The number is active 24 hours a day/7 days a week.
Online: https://www.safeco.com/claims/

Mobile Claim Locations

NorCal location
Lowe’s Home Improvement Center
2350 Forest Ave, Chico, CA 95928
Hours: M-F 8:00 a.m. to 6:00 p.m. and Sat. to Sun. 9:00 a.m. to 5:00 p.m.
Primary onsite contact: Joe Otts (407) 595-3243

SoCal location **Starting Thursday, Nov. 15**
Cal Lutheran University
130 Overton Ct, Thousand Oaks, CA 91360
Hours: M-F 8:00 a.m. to 6:00 p.m. and Sat. to Sun. 9:00 a.m. to 5:00 p.m.

HMA Helps Local Veterans

Wed, 31 Oct 2018 16:37:00 GMT

HMA Insurance joins with Volunteers of America to help struggling military Veterans put life back together. We are all aware of the growing homeless crisis, but we never really stop to consider how many families and individuals on the streets are military Veterans. Veterans who have given of themselves to protect our right to freedom. With the challenges of mental health issues, unemployment, and drug addiction, it has become increasingly difficult for our local Veterans to put life back together.

We will be working with Volunteers of America on an ongoing basis to support them in their efforts. We encourage you to take a moment to connect with us to find out how you can join us in this amazing cause. Also, be on the lookout for information on our “ drop some pounds in the New Year ” clothing drive. A drive for new or gently used professional attire to help our local Veterans dress for the workplace.

Could You Be Under-insured?

Thu, 30 Aug 2018 15:56:00 GMT

Underinsured = having inadequate insurance coverage

Being in the insurance business, it’s easy for us to use terms without ever stopping to think if people really get what we are saying. I guess every industry has words that are used every day, but to those outside that industry, those words may not translate as well as one would think.

Hence, we’ve created, HMA’isms ! These are everyday insurance terms made plain for your delight. This month’s word is “underinsured.”

I will use it in a sentence. If your home is “ underinsured,” you would not have enough money to rebuild it in the event of a total loss. It is a common misconception that though you’ve made improvements in your home (that increases the value), that your homeowner’s insurance policy automagically adjusts.

One thing we like to communicate to our clients is… if your life changes, so should your insurance. It’s not about getting you to spend more money, it’s about protecting what matters most to you. To receive a complimentary policy review, just text “POLICYREVIEW” to 714.942.5097. We are more than happy to help!

A Life Insurance Mistake

Wed, 29 Aug 2018 20:50:00 GMT

Rather than being able to grieve the loss of her husband, she is now in a legal battle to get a share of the benefits from the policy. As sad as this story is, it’s a very common occurrence. We always recommend that couples have a conversation about life insurance, especially when there have been previous marriages. We also recommend that the life insurance policy is kept in a place that is easily accessible as the surviving spouse is grieving their loss.

If you have questions or would like to learn more about the different type of life insurance policies, just text the word “LIFE” to 714.942.5097.

The $1,000,000 Law Suit

Mon, 30 Jul 2018 18:38:00 GMT

Our client is being sued for injuries to a bicyclist that he avoided hitting. While making a left turn he noticed a bicyclist coming down the hill toward him at a high rate of speed. Our client stopped his left turn prior to the bicyclist passing through the intersection leaving plenty of room for the bicyclist to pass through the intersection. The bicyclist swerved and lost control of his bike while reacting to our client’s car making a left turn.

Now our client is being sued for more than $1,000,000 for damages to a bicyclist that he never hit. Fortunately, we had the right protection in place for our client. First, his auto insurance has personal liability limits of $250,000 (State of CA only requires $15,000). Second, we added an umbrella policy of $1,000,000 to cover what would not be paid by his auto insurance. The increased protection for our client costs less than $300 per year. As a result, all of his personal assets (including his home) are protected in the event the bicyclist wins the law suit.

To learn more about umbrella policies or to have an agent conduct a policy limits review, click Umbrella or Policy Review .

5 Rules Every Landlord Should Live By

Thu, 16 Mar 2017 19:27:00 GMT

I’m pretty confident that if you asked anyone who has ever owned a rental property you would get an overwhelming response that it’s not as lucrative or easy as they thought it would be. In fact, owning a rental property can be a major pain, and end up costing you a ton of money!

I certainly don’t mean to be a “Debbie Downer”, and I know that if it’s done right it can be lucrative, but from an insurance agent’s perspective, I don’t see a lot of people doing it right.

So you’re probably thinking, “Well Chris, you are an insurance agent. What do you know about real estate or rental properties? Why should I take advice from you?”

I’m not a real estate agent, and I don’t own a rental property. However, several of my friends/family/clients/co-workers own rentals, and because I insure a bunch of their properties, I’ve had a first hand account of the process, and I’ve learned what to do, and what not to do.

1.) Do your due diligence on the rental property

This is undoubtedly the biggest mistake I see landlords make. They are in such a rush to make money, they don’t pay enough attention to the property. I get it–you want to buy the cheapest property possible so you can turn the biggest profit. The problem with that is, the property is cheap for a reason. It has problems–lots of problems.

Be very careful with the “as-is” property too. Unless you have money to burn, stay away. You are almost always going to spend more money than you think. Most “as-is” properties are either forecloser’s or properties that have been vacant/abandoned.

If you don’t know what to look for in a rental, hire a trusted 3rd party home inspector and make sure everything , and I mean everything checks out. Don’t leave any stone unturned.

Everything must be up to code before you have a tenant in the house. Period. If it’s not, make it up to code.

In particular, you need to make sure the wiring, plumbing, heating, and roof are all “problem-free”, and that they’ve been upgraded or updated within the past 10 years. I’ve seen more problems with those three things than anything else, and you are putting yourself (lawsuit), and your tenant at risk if they aren’t in good working condition.

And whatever you do, make sure there are no mold problems . Don’t just assume there isn’t. You need to test the house, and document it. Mold can kill–literally.

Of course, you may want to walk away from a property because it might be cost-prohibitive to bring everything up to code, and that’s something that only you can decide, but before you buy a rental property and put get a tenant, do your due diligence on the home.

It’s worth the time and effort.

2.) Have written contracts in place

Find a lawyer and pay his/her fee. Trust me it’s worth it. You can’t just tell your tentant, “You break it, you buy it”. You need to have a written rental contract and lease in place.

If at all possible, don’t sign less than a 12 month lease, and make sure your tenant thoroughly understands the terms of the contract. Don’t be lazy and just have them sign it without explaining everything first.

You can save yourself a lot of time, money, and hassle if you do this, and it will show the tenant that you are serious, and that they will be held accountable for the property.

3.) Thoroughly screen your tenants

Rarely have I seen someone screen their tenant(s). Most landlords are so worried about getting someone in the property to pay rent, that they fail to check the people/person out.

At the very least, you need to make sure your tenant is carrying their own renters insurance (HO4 policy). Let the tenant know that your insurance doesn’t cover them whatsoever.

Really what you should be doing is checking their credit and also checking for any criminal activity. These are reports that cost very little up front, and will give you great piece of mind knowing that you have a trustworthy, reliable tenant.

Whether you allow pets and/or smoking is up to you, but I’d be careful with both, because in the end, they could cost you money if you have to repaint, replace carpeting, etc. They could also potentially result in liability exposure with dog bites, and house fires.

4.) Make sure you have rental property insurance

Having the correct type of insurance for your rental property is paramount. The problem is, most people don’t know that they need a certain type of policy.

You can not buy traditional homeowners insurance for a rental property. What you need is called a “Dwelling Fire” policy, or sometimes it’s referred to is a “Landlord” policy.

Keep in mind that the underwriting for rental properties is generally a little tighter, and the coverage isn’t as broad as what you would find in a traditional homeowners policy. As I mentioned before, many people buy properties in low income areas, with hopes of re-painting the walls every 5 years and making some rent money.

The problem is, that’s the exact type of property that insurance companies don’t want to take a risk on.

Still you must buy this type of policy for a rental. Do not buy regular homeowners insurance because it is not designed to insure a non-owner-occupied home, and your claim would almost certainly be denied if you had the wrong policy.

Another thing you need to be aware of, is that most Dwelling Fire/Landlord policies state that if a property is vacant/un-rented for more than 30 consecutive days (with some companies it’s 60 days), coverage can be severely reduced and even eliminated, so make sure if it’s a rental property, don’t let it sit vacant too long.

If you think it will be vacant for more than 30-60 days, you need to let your insurance carrier know that, because that situation would most likely call for a different type of Dwelling Fire policy.

5.) Keep tabs on your rental property

I’ve had people call me for quotes for their rental properties, and when I begin to probe them on the construction information, they know absolutely nothing about the house.

Some people don’t know whether the house is brick, siding, or what it’s made of. They don’t know how old the roof is, or the last time the heating was updated.

Folks, if you own a rental property, you need to know all of these things.

I had someone one time who had purchased a home from a contractor who had flipped it, and hadn’t even seen the house once. He bought it on the word of the contractor, and knew nothing about it except that he wanted to rent it out as soon as possible. That is well, not very smart. You shouldn’t be trying to get insurance on a house you haven’t seen yet.

You need to keep tabs on your property .

Keep records of all repairs, and make sure you physically visit or at least drive by the property every 3-6 months or so to make sure everything is in good working order. Remember, this is an investment. You need to maintain and take care of the property just as if it was your primary residence.

Owning a rental properties can be a lucrative business that can generate a lot of passive income, however, if you don’t abide by these 5 rules, it could end up being a royal pain, and cost you a lot of money in the process.

Will my credit rating change my insurance rates?

Thu, 02 Feb 2017 16:47:00 GMT

I was recently asked this question by one of our HMA Insurance clients, and thought I would share the answer here for our readers.

There are a lot of things that go into homeowners and auto insurance rates, one of them being credit. I’ve heard a lot of complaints from people who don’t like the fact that insurance companies use credit in their underwriting.

Some people have absolutely no idea that it’s used in the rate at all.

At the end of the day, there’s not much we can do about it though. Insurance companies have been using credit in their rates for decades, and that’s not likely to change.

By the way, insurance companies don’t pull your credit like a mortgage company or credit card company does. There is no negative impact on your credit as a result of an insurance company looking at it.

When I say “pull” what I mean is that the insurance company is doing what’s called a soft inquiry, which is not the same thing as having your credit pulled (hard inquiry).

When does credit play a role in insurance rates?
It’s important to understand that insurance companies don’t continuously check or monitor your credit. Usually, they only check it when you first get a quote and/or sign up with them in the very beginning.

This means that if your credit score increases (or decreases) your insurance company does not automatically know about it.

So, to my customers question of whether or not his increased credit score will lower his rates, the answer is not automatically.

What has to be done on our side as the agent is contact the carrier the insurance and ask them to do what’s commonly referred to as a “re-score”. This is when the insurance company can re-run the person’s credit (soft inquiry) to see if there is any positive bearing on the rate.

This isn’t something that the insurance company is going to let the agency do every single year, so it’s not worth even asking unless there has been a significant change in your credit score, and only you as the customer would know if that was the case.

If you’d like to get a better handle on your credit rating, it could be helpful to setup credit monitoring. We hope this was helpful! As always, leave us comment below if you have any questions.

Why Do My Auto Insurance Rates Keep Going Up Even Though My Car Keeps Getting Older?

Thu, 02 Feb 2017 16:45:00 GMT

Why do my auto insurance rates keep going up even though my car is getting older? At HMA Insurance, many of our clients ask this question so I would like to address it from a couple of angles.

First things first, even though it’s called car/auto insurance, it covers more than just your car. It should technically be called “auto-owners” insurance, similarly to how home insurance is actually called “home owners insurance”.

It’s important to understand that there are a lot of variables that go into insurance premiums, and with auto insurance, it’s no different.

The insurance company is much more concerned with you crashing into someone and causing them (or yourself) bodily harm, or death, than they are about your car. A car is a material possession which can be replaced.

A human life is not.

When is the last time you looked at your auto insurance policy?
If you look at it you’ll notice there are a lot of different coverages on your auto policy.

Bodily injury
Property damage
Un-insured motorist
Under-insured motorist
Medical Payments
Loss of Income
Funeral Expense
Loss of use
Rental Reimbursement

These are all things that you are covered for on your auto policy. How many of them have to do with your car?

None.

How many of them have a price next to them on your policy?

All of them.

Your car isn’t the only thing you’re being charged for on your policy
That’s because auto insurance covers far more important things than your car as mentioned above.

Let me re-phrase that: your car insurance rate isn’t just based on your car.

You’re not the only one…
It’s also important to understand that you are not the only person your insurance company insures. You are one fish in an ocean of other fish, sharks, and sea creatures, all who have different characteristics and risk profiles.

Insurance is all about spreading costs over a large number (risk pool) of people, which each person paying their fare share. That risk pool is constantly changing, and is impacted by a ton of different things, including the overall economic climate.

This means that you are sharing in the cost of millions of other people, many of whom may have poor loss history and/or credit.

That’s what insurance is though — sharing in the cost.

The next time your auto insurance rates go up, take a look at the big picture. Make sure you’re looking at ALL of the coverages, and corresponding rates.

Hope this helps! If you would like to know more about Car Insurance be sure to visit our page dedicated to it.