Is Earthquake insurance worth it (San Diego: living in, homeowner, expense)

[HarryKerry]

Originally Posted by CaliInChappaqua

You might have difficulty getting a mortgage without earthquake insurance.

Absolutely!

[HarryKerry]

The problem is EQ insurance is REALLY expensive now, and/or may have a high deductible. The Northridge quake is most responsible for insurance companies greatly increasing the cost of EQ insurance. I would say if you have a few hundred thousand in the bank, then the most likely damage from a quake SMALLER than "the big one," can be repaired from your nest egg, and EQ insurance just may not pencil out in the long run.

To those who say EQ insurance is flat-out unnecessary, I would disagree, particularity for those who don't have cash in the bank. But, following the logic by those who say NOT to get EQ insurance, then those same people would be best NOT to have any homeowners insurance, especially coverage for those who may be injured on your property, as that just does not happen, statistically, to make ANY sense. Also, a vast majority of homes are NOT burglarized nor vandalized nor in any way suffer such damage as to make homeowners insurance a wise purchase except for fools. Of course, assuming you OWN the home and have NO mortgage, you can save your self a LOT of money that you will NEVER see, even if you do use it to replace your broken dishwasher.

So, why get any insurance? Because of the risk, that is in your favor of NEVER suffering loss to warrant insurance OR have it work out that you still paid MORE in premiums than what your get as your claim, you still have to ask yourself if you are willing to take that risk. And, most people aren't, and that is OK, but that is how insurance works: it is a bad; it is a con-game, and the fact that the VAST majority will never need the insurance nor make a claim that, over time, still leaves the homeowner having paid more in premiums than what they may get in a claim, is EXACTLY why insurance companies are the WEALTHIEST institutions on the planet owning every building in America over 10 stories.

And don't be fooled, no insurance company at the APEX of all the subsidiaries under its byzantine corporate structure is ever going to go bankrupt, even in a natural disaster, but their subsidiaries are designed to go bankrupt once they reach a point the big insurance company owner can put a stop to the claims, not to mention the insurance companies can legally have TWO sets of book, unlike any other business in America. I had better stop, but if people really know how insurance works and how much people are being cheated with their polices, people really would rise up and revolt with weapons. I'm done.

[CA4Now]

Originally Posted by HarryKerry

The problem is EQ insurance is REALLY expensive now, and/or may have a high deductible.

Our earthquake insurance is under $1,000 per year. I can't imagine living in southern CA without earthquake insurance. (Half of you were probably not around during the Sylmar quake in 1971; I was a teenager then and that did it for me.)

[Mathguy]

Originally Posted by HarryKerry

not to mention the insurance companies can legally have TWO sets of book, unlike any other business in America. I had better stop, but if people really know how insurance works and how much people are being cheated with their polices, people really would rise up and revolt with weapons. I'm done.

Sigh. They are required to follow both SAP and GAAP accounting.

The former being in general much MORE conservative in order to address immediate liquidity in the face of a big catastrophe.

Care to respond?

Cheated on their policies? Cite a source please.

Seriously, you are slapping the tin-foil on with lightning speed and there have been HUGE disasters in the US like Katrina, Andrew and the 2005 year in FL that were all dealt with satisfactorily.

Let's see what you got sparky.

[PureHapa]

In very few instances is EQ insurance a requirement to get a mortgage in California.

[Cluckr7]

PureHapa is right. Most lenders just care that the home has regular hazard insurance. I've never heard of a lender specifically requiring earthquake insurance, which is supported by the fact that 90% of Californians do NOT have it.

[Samoi137]

In Torrance, I'd probably get it but would obviously look carefully at its provisions. And contact my mortgage company. But how to judge what other areas? We're considering a second home in the foothills east of Sacramento. I lived in Sac and didn't have EQ insurance (not to be confused with DQ insurance, to protect you from the possibiity of an avalanche of soft ice cream), but not sure about aras near Auburn. Best source to judge eathquake danger?

For Auburn, City Data says "Auburn-area historical earthquake activity is significantly below California state average. It is 337% greater than the overall U.S. average."

For Torrance, City Data says "Torrance-area historical earthquake activity is above California state average. It is 2520% greater than the overall U.S. average."


This may help:
Buying earthquake homeowners insurance - Mar. 4, 2010
Earthquake insurance: 8 things you need to know - CBS News
California Earthquake Authority - Version 2.0 About Earthquake Insurance

[Spikett]

One of the major issues after a quake is the expense of living somewhere else if your house is red tagged and you can't live there during repairs. If you have a policy that covers these temporary living expenses it can definitely be worth it. I know people who, after the Northridge quake, would have had a very hard time indeed without that coverage to pay the rent on their temp apartments while their houses were uninhabitable.

[Andrew York]

Myth: You must have equity in your home for earthquake insurance to make sense.
Fact: Earthquake Insurance covers home equity as well as the home structure itself and just as important, your credit rating. If you walk away from a damaged home / loan you could face a foreclosure on your credit report, making it hard to get a loan and a job. If you have a second mortgage the lender could sue you and possibly seize your income and other assets. The San Francisco Chronicle has a great article outlining even more detrimental effects of declining residential earthquake coverage.

Myth: Everyone talks about the big one but even Northridge wasn’t that bad.
Fact: Japan’s 2011 8.9 quake and other recent natural catastrophe’s around the world should be a wake-up call to all of us that quakes don’t just cause structural damage to everything but flood and fire are sure to follow if the quake is large enough. The Northridge Earthquake was a 6.7 magnitude and killed 57, 8,700 injured and 1,600 hospitalized. It caused a total of $20 billion in damage.

Myth: Even if there is damage to your home, FEMA will step in and take care of everything.
Fact: After a natural disaster FEMA is there to help you get back on your feet IF the state governor declares an emergency, however when it comes to rebuilding your home very little relief will come from this agency. First you will have to apply for a low interest loan. If you didn’t have earthquake insurance to begin with it’s very possible that your credit will be ruined (see myth/fact #1) and not eligible for most loans. Because it is a loan it will need to be repaid if you do get it and can maintain or get a new job (if your place of employment hasn’t gone under). If you can dodge these other issues, the maximum loan amount from FEMA will probably be about $30,000. Most cars in California are worth more than that.

Myth: The deductible on earthquake insurance policies is too high for it to be worth purchasing a policy.
Fact: Earthquake Insurance deductibles are not what they used to be. Most, if not all carriers that offer quake coverage will now offer deductibles as low as 10%. There is also a fairly new product called an earthquake deductible buyback that will reduce your quake deductible to as low at 5%. If you have all of this coverage you will/ should be eligible for a loan to cover the 5% deductible out of pocket if you do not have it on hand in the event of a catastrophe.

Myth: If there is an earthquake so big that it causes structural damage to your home, so many homes will be damaged that the insurance companies won’t have the money to honor their claims.
Fact: Well, if you go with the California Earthquake Authority that may be true and here’s why: CEA is non-admitted in the state of California. Other companies like GeoVera and AXIS that offer stand-alone earthquake coverage are admitted carriers. This means that they are backed financially by the state of California if they run out of claims reserves. It’s a guarantee that all claims will be paid. Also, these companies are constantly regulated and rated by AM Best. AM Best is an organization that monitors the claims paying ability of all insurance carriers. If the carrier is determined to have enough money to meet their financial obligations in the worst scenario’s, then the carrier will most likely carry an AM Best rating of A+.

Myth: My fire insurance policy will cover everything if there is an earthquake.
Fact: Before the Northridge earthquake of 1994 in California, most fire insurance companies included the peril of earthquake in their policies. After Northridge, so much was paid out in claims that most fire companies got out of California all together. Now, damage to any residential structure caused by the peril of earthquake is not covered on any fire policy and therefore we have separate companies like CEA, GeoVera and AXIS that cover only the peril of earthquake.

Other facts: Only 17% of California homeowners have earthquake insurance. *Los Angeles Times Oct 26, 2012. [url=http://www.earthquakeinsurance.biz]www.earthquakeinsurance.biz[/url] for more info!

[Catras]

This was a very interesting read. My friend lived through the Northridge and her condo was destroyed. Luckily she was not hurt and was able to move on. I think she had some savings. She ended up moving to Oregon and stayed with some other friends. She has since moved back to CA.

We have had a few earthquakes here in Oregon, of course nothing too big but still I wonder if we need insurance and if it would be reasonable since their is a lower probability of an earthquake up here being extremely severe.