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I am having a hard time figuring out whether to get earthquake insurance, and if so, from where. The most recent related topics in the archives are from 2007. First, should we get earthquake insurance? I know the risk of an earthquake is very high, but so are the premiums and deductibles! We have had our house bolted to the foundation, reinforced etc. I am inclined to get it because I am a risk-adverse person, but I would like to understand the value proposition better. Second, if we get earthquake insurance, should we just get it from our the company that provides our basic homeowner insurance (State Farm) or does it make sense to shop around? Many thanks. worried in Berkeley
Every year when I write that BIG check I wonder if I'm doing the right thing. The insurance is expensive and has a huge deductible. We pay something like $2500/year for our $600k home with a $60k deductible.
A hayward fault earthquake is likely - and getting more likely in each year. Here's a graphic showing the probabilities: http://earthquake.usgs.gov/regional/nca/ucerf/images/2008probabilities-lrg.jpg
However, not all homes will be severely damaged, even in a large earthquake. I believe the estimate for a 7.0 hayward fault earthquake is that around 10% of homes in Alameda county will be severely damaged.
Many people think that those insurance premium dollars would be better spent on earthquake upgrades to the home - for example, in addition to foundation bolting and cripple wall bracing, you could have your chimney removed, improve the bracing of non-structural elements like shelves and TVs, and prepare your emergency supplies. It would be pretty amazing to spend $2k each year on those sorts of improvements.
A lot of people also question whether CEA will even pay out. The fund will only pay out to the extent that it has enough cash to do so. You have to wonder, in a large bay area earthquake, whether that fund will empty pretty quickly. Lastly, in the event of a catastrophic earthquake, many people may choose to leave the bay area and not come back. The economy will be disrupted for a long time. Home prices are likely to drop for a while. You might consider how this factors into your decision.
The reason I chose to have the insurance despite these concerns is that I thought about the reality of our lives if our home was destroyed by an earthquake or ensuing fire. We have an unusual, personal loan covering our mortgage which would make it awkward to go into foreclosure. And our equity is currently larger than the deductible. If those weren't the case, I don't think I'd have done it. Good luck, - earthquake believer
One thing to be aware of is that even if you have taken retrofitting measures, you still may not be doing all the recommended safeguards. One study found that 85% of homes that had retrofitted following the advice of a contractor did not have proper measures installed. This was true for us when we hired Dave Ford to come take a look. I highly recommend having him come to your home. He seems very trustworthy and does very good work. He is extremely well-informed, much more so than the vast majority of contractors. He recommended we get an engineer, which was actually a money-saver and put our minds at ease. I would use my money first on doing this, before buying the insurance. Now I am confident that our house won't fall down.
However, I have debated the question a lot about whether to pay for this insurance or not. Despite having really good retrofitting done a la Dave Ford and his recommended engineer, we still are paying for it. Our house is our biggest asset, and we just want that reassurance that if the house really suffered in a quake, our investment would not collapse. But it is a tough decision... Follow Your Gut
Whether it makes sense to get the insurance depends on your individual circumstances. The higher the seismic hazard for your house, the greater the chances that damage to your house might exceed that 15% deductible. Depending on where you live (are you in a fault zone, a slide zone, or a liquefaction zone?) and the type of construction (e.g. a soft story building), you may be at greater risk for serious damage. Or you might wind up with some broken windows and a chimney damage, which wouldn't come close to meeting the deductible. I have insurance because my house is in the fault zone (less than 1/4 mile from the Hayward Fault) AND in the slide zone, and it has the original 1920s foundation. In previous houses, I just did standard bolting and shearwalling. Shaky
While earthquake insurance through the state has come down a tad recently, I have also heard that several companies offer private earthquake insurance that offer lower rates and more coverage options. Anyone done the research and have experience with other companies? Thanks. Bryan
We just received an offer of a California Earthquake Authority policy. It states that our current homeowners insurance does not provide coverage in the event of an earthquake. Is earthquake insurance necessary? I only ask because the policy is very expensive and the deductible is high. If earthquake insurance is necessary, could someone recommend who we should go through (someone reputable). Thanks in advance. Joy
In additon, be sure to secure tall heavy furniture, mirrors, etc., and other ''non-structural'' hazards that may cause damage and injury (and wouldn't be covered by EQ insurance). R.K.
Few if any insurance carriers offer anything but CEA policies for earthquake coverage and those are pretty standardized. There is a high deductible, but given the price of Bay Area real estate I think the policy is still worth having. I don't know how much pricing varies. Start by calling the carrier that has your general homeowners' policy and ask what they offer. (Ours is through USAA, which is only available to current or former members of the military and their children.) Bought the Coverage
Many people, such as myself, have made the calculation that earthquake insurance is too expensive, covers too little, and is not necessarily going to pay out should there be a massive loss. That is, the insurer may go insolvent, and it is not backed up by the federal government (as I believe flood insurance is). (Don't forget how expensive and difficult it will be to get contractors and building materials in the immediate aftermath of a quake when everybody else is doing the exact same thing.) In my opinion, a far better investment of your $1000-plus annual premium would be to improve the safety of your home's structure, particularly replacing or improving the foundation and adding shear walls. Oakland and Berkeley offer a one-time credit toward your transfer tax that can make retrofitting more financially appealing. Another good investment would be some survival supplies like bottled water, canned food, camping stoves and extra fuel to help you get by for a few days.
On the other hand, if you are sure you would need an insurance settlement (as opposed to, say, savings) to rebuild your home after it is destroyed by an earthquake, earthquake insurance is really your only option. David
I have earthquake insurance. It costs about a third more than my basic homeowners insurance. In other words, adding earthquake protection increased the cost of my total homeowners insurance by 250%. Why do I pay for it? When I bought the house, the foundation was crumbling to the point where there was no way to bolt the house to the foundation. I was afraid even a minor quake would destroy the house, leaving me with a giant mortgage and nothing to show for it. Now that I have a foundation and all the proper earthquake retrofits I still keep the insurance. Why? because the risk of a quake is so high.
Regarding purchasing earthquake insurance, this is from the California Earthquake Authority website (http://www.earthquakeauthority.com/members.html#top):
''In order to purchase a CEA earthquake insurance policy, your homeowner insurance must be issued by one of the CEA Member Insurance Companies listed below. Click on any of the company names listed below for additional contact information. Allstate Insurance Company Armed Forces Insurance Exchange California FAIR Plan CSAA Encompass Insurance (formerly CNA) Farmers Insurance Group Homesite Insurance of California Interinsurance Exchange of the Automobile Club Liberty Mutual Merastar Mercury Prudential State Farm Insurance USAA Workmen's Auto Insurance''Carrie
Earthquake Insurance - To have or not to have? Our 100 year old (+/-) brown shingle home is located in the Elmwood District off College Avenue in Berkeley. We have redone the foundation, bolted, shearwalled, etc. We have had EQ insurance since our purchase over a decade ago. As it was a fixer upper, we bought well below the market value. Given this and the increase in values in this area, we have happily seen our house value increase over the years, which means we have a lot of equity in our home. This has been the argument for paying for costly EQ insurance - that we have more to loose than the mortgage company should there be a devastating earthquake. Is this sound logic? What, beyond worry or adversity to risk, is the criteria for having an EQ policy? A few years ago the policy doubled! and the company seemed to offer less coverage. Our broker has given us the impression that if we cancel this policy we won't get another due to the age of our home. Is this true? It is getting harder to justify the expense, but then we don't want to loose on our investment. Advice greatly appreciated.
Second, IF you decide to get insurance, consider that you are insuring against complete loss; that means if the damage is only partial, probably the cost of the insurance will outweigh the risk. SO you could get a deductible of 200-300 thousand. This will bring down your premium tremendously and insure you for what you really need which is catastrophic loss. peter
Our agent is Alan Quan with Allstate. Last year we price shopped for insurance after being with Farmers for almost 7 years. Allstate had the best prices for our needs and I liked Alan's attentiveness in getting the policy written, coming to our house quickly, returning phone calls promptly, etc. His phone number is 510-581-8213.
Be prepared for sticker shock on earthquake. All earthquake insurance is provided by the State of California but you purchase it via whatever your insurance company you end up going with. The deductibles are outrageous and so are the rates. Our CEA (California Earthquake Authority) policy is actually $700 per year more than our homeowners policy. The CEA recently lowered the rates due to pressure from politicians but it only lowered our bill by a couple of hundred dollars.
We debated about whether to carry the coverage or not. Our decision came down to whether we could financially recover if we lost 100% of the equity in our house due to a catastrophic earthquake. We decided we couldn't and forked over the money.
I get upset on this topic because we had earthquake coverage through Farmers prior to the CEA and it was extremely affordable. The catch 22 back then was that you couldn't shop around for homeowners rates because insurers wouldn't accept new policies. Once the CEA took over the earthquake liability insurers agreed to write new policies in California. I've also read a lot of debate about whether the CEA would have enough money to cover losses in a catastrophic earthquake. It's also questionable how an entire area could recover from a major quake given most people have been priced out of the CEA's rates and therefore are not carrying the insurance.
I know that Amica, a highly regarded and highly rated out-of-state insurance company, offers their own earthquake insurance, which I believe provides much better coverage than offered through the CEA. However, I also know that they are very restrictive and for many years were not accepting new policy holders in CA. A friend recently told me that they currently writing new policies in CA but only for houses built fairly recently. Their # is 800-242-6422.
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