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Way OT: Earthquake Insurance


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I really don't know very much about earthquake insurance at all, probably a bit odd since I live near Los Angeles, California.

 

If we own a home and have maybe about $75,000-100,000 in equity and still owe quite a bit on the loan, and we have a rate or premium of $427/year and the applicable deductible is $28,320, I guess it's worth it, but I hear so many people saying it's not worth it. Only about 1 of every 10 homeowners even have earthquake insurance because it's so expensive. Just wondering what your thoughts were.

 

http://www.emergencymgmt.com/disaster/Opinions-Divided-Value-Earthquake-Insurance.html

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We had just purchased a town home in Sherman Oaks 6 weeks before the Northridge quake hit. We had earthquake as an association, and it paid off, but not before we hired our own adjuster and fought them on it. Eighteen months later we finally got what we thought was a fair payout. I've heard that the insurance companies have really changed the policies in their favor since that quake. Right now I don't have it, but we're in Ventura County, and just read about a new fault in Ventura thought to have a high possibility of triggering other faults if it goes. I am reconsidering..having a chat next week with my agent about that very thing.
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I hear conflicting opinions on whether earthquake insurance is worth it. Your premium sounds high. On our primary residence the premium is $125 for about $370k worth of coverage. Now that I think about it we should probably raise our limits, but in that grand scheme of things it's not that much money. I wonder why your premium is so high. Maybe San Diego is assigned to a different risk pool than LA? What part of "Near LA" are you in? Sylmar? :) It could also be that new insureds pay more. I'm looking at my records and I see that our insurance has generally gone down every year for the past ten years, even though our coverage has increased with inflation. We were paying $242 in 2005.

 

Anyway, we are only about 5 or 6 miles from the Rose Canyon Fault. They say it's dormant, they think, but ya never know.

 

Unlike a fire policy, earthquake policies typically have a 20% deductible, so if The Big One hits, you're not completely covered, but you not completely screwed either.

 

After the Northridge quake, all policies are now underwritten by the California Earthquake Authority, but administered through whatever company handles your homeowners insurance.

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Not having earthquake insurance if you're near an area that has an earthquake potential is unwise.

 

Yes, earthquake insurance is not cheap but a small tremor could do phenomenal damage in less than a minute.

 

I live relatively close to the New Madrid fault. We've had a few tremors during my lifetime. It's a risk I don't want to take.

 

State Farm offers a rider for earthquake insurance. Some providers will not and/or require a separate policy. My additional premium is something over $100 and also has a 5% deductible for earthquakes.

Kurzweil Forte, Yamaha Motif ES7, Muse Receptor 2 Pro Max, Neo Ventilator
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First, I really appreciate the thoughtful comments so far. This stuff confuses me, and sometimes, I overthink it, which maybe doesn't always make sense since I also don't know so much about it.

 

But my thinking was that maybe I should do it for peace of mind in case a catastrophic earthquake does occur, even if it's statistically unlikely that I may ever get actually benefit from it. And perhaps regard it how most regard life insurance.

 

If only 1 out of 10 people have it, it does make me wonder about its worth, but I can't help but think that maybe this is the time to get it. I had heard that the average premium was about $1000 in California, so I was thinking that maybe $427 wasn't so bad. Is this not true? I am located in the San Fernando Valley, North Los Angeles, and yes, we are near Reseda (for those who don't know, the Northridge Earthquake was actually centered in Reseda) and Sylmar.

 

And yes, I've heard the same thing: all policies are now underwritten by the California Earthquake Authority, but administered through whatever company handles your homeowners insurance.

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Ken,

 

I know my opinion does not carry as much weight since I don't live in California but my perspective may be meaningful.

 

I carry the coverage because I was smart enough to dig into it. A small tremor could cause tens of thousands of $$ worth of damage to my home. I would have a hard time absorbing that.

 

I'm sure most people assume they are covered if an earthquake occurs. Just like they assume they are covered if they get water in their basement or if the sewer backs up into their home (two things that aren't covered).

 

Your rate is higher but the risk is higher where you live and your homes cost a lot more there.

 

Only you can decide if you want to take the risk or not.

 

Greg

Kurzweil Forte, Yamaha Motif ES7, Muse Receptor 2 Pro Max, Neo Ventilator
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Ken, the reason that only 1 out of 10 people have earthquake insurance is that mortgage companies don't require it - unlike homeowner's insurance, or flood insurance for people who live in a flood plain. I don't know what percentage of Californians own their homes free and clear, but it ain't 90%. And the fact that mortgage companies - who presumably have mastered the whole actuarial thing - don't require it tells me they've run their own numbers and concluded that, in the aggregate, it's not worth it.

 

But that's in the aggregate, and us regular folks don't own an aggregate of homes. So, what price peace of mind? In the grand scheme of things, a few hundred bucks a year isn't all that much money relative to the risk it insures against.

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We do have a lot of renters in the state.

 

Greg, actually, I like your reasoning, so it does carry a lot of weight. Good reasoning always carries a lot of weight!

 

Anyway, so this makes me feel a little better, that I'm leaning the right way, considering getting it. Last night, I fired off an email to my insurance company, so hopefully they can help us out a little. I like them, and have dealt with them for a long time. Thanks again, it's greatly appreciated!

 

 

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If you live in CA it is not a matter of "if" but "when". Maybe tomorrow, maybe 20 years. If you do not have earthquake insurance and the big one hits you may be sitting on a pile of rubble, no home, and still owing the balance of your mortgage to the lending institution. Many of the wealthy here self-insure because they can afford to rebuild their million dollar homes if they go down. If you can't afford to pay off your mortgage balance and start over you really should have the state administered insurance. One other thing...if a quake hits and a fire starts in your home because of ruptured gas lines, etc, your homeowners (fire) policy will cover the loss. If there is no fire you pay for all the damage unless you have quake insurance.
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I have a house that's 105 years old....and my last house, not far from my current location.....is 150 years old. I figured if they made it that long and are still standing, chances are they'll be good during the rest of my lifetime. Of course, there is the aforementioned new Madrid fault that they keep telling us will destroy the city someday.

Dan

 

Acoustic/Electric stringed instruments ranging from 4 to 230 strings, hammered, picked, fingered, slapped, and plucked. Analog and Digital Electronic instruments, reeds, and throat/mouth.

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I have a house that's 105 years old....and my last house, not far from my current location.....is 150 years old. I figured if they made it that long and are still standing, chances are they'll be good during the rest of my lifetime.

Or it could mean it's more likely to occur sooner than later. :laugh:

Kurzweil Forte, Yamaha Motif ES7, Muse Receptor 2 Pro Max, Neo Ventilator
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...I've got quake insurance due to the New Madrid fault; less than 100 miles from where I live in West Tennessee.

 

Insurance is for the unexpected; no guarantee you'll need it but-I've had more than one tremor in the 15+ years I've lived here.

 

Gonna keep it as long as I'm here.

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