Is Earthquake Insurance worthwhile?

[❤ mollymouser ❤]

We live in central California in a single-story wood frame home built in 1979. House value is approximately $300,000 in today's market.

We just got our annual 30-day notice of our right to purchase Earthquake Insurance on our home.

Exclusions: doesn't cover anything to do with the pool, masonry fences, masonry on the home, or the chimney.

Deductible: $63,000

Personal Items Coverage: $5,000

Relocation Expenses: $1,500

Premium: $216 per year


Earthquakes in the general area: 1983 Coalinga Earthquake (6.5) ... approximately 75 miles southwest of our city. There was also the 2004 Parkfield Earthquake (6.0) approximately 95 miles southwest of our city.

With this information in mind, would you spring for Earthquake Coverage?

[azphx1972]

Only $216/year? Pretty cheap for catastrophic coverage IMO. I'd cut back on eating out a few times to buy that, but then again my risk tolerance is pretty low when it comes to these things. I even purchase flood insurance for my house and it's not technically in a flood zone, but I do live near a wash so a hundred year flood could put my home at risk.

[schildi]

I think it's worth it. If the big one hits ...
Our house is worth ~ $280K or so, our earthquake coverage is $160 per year with a 10% ($27K?) deductible.

[Gardening Grandma]

We have earthquake ins. Ours runs about $175 a year. The deductible is a steep 20%, but we live in earthquake country and I would not want to be without it.
Yours sounds like a better deal than our policy. I'd spring for it in a heartbeat.

[❤ mollymouser ❤]

I guess it's the $63,000 deductible that gives me pause. But you're right ~ $216 for catastrophic coverage to the house is still probably a pretty good deal.

[Sum Dum Gai]

We live right on a fault line pretty much, so yeah, we have quake insurance. If you're further from a fualt line it's up to you.

My take is, if disaster did hit would you look back at some category of your spending and really wish you'd spent that $216 on the quake insurance instead? If the answer is a big yes you might want to seriously consider the insurance.

[Poppet]

Where are you going to get the 63K deductible should, God forbid, an earthquake majorly damage your home? Borrow? Savings?

[schildi]

Mar 27, 2011 11:09:01 GMT -5 Poppet said:

Where are you going to get the 63K deductible should, God forbid, an earthquake majorly damage your home? Borrow? Savings?

A $63K deductible is pretty stiff, but still better than getting nothing. There are many options replacing that deductible: savings, a new mortgage, downsizing, building in the same lot for less (my favorite) are a few that come to my mind.
Luckily, our deductible is "only" around $30,000, and while we could easily cover that from savings / EF, I would probably re-build as my own contractor, therefore saving the $30K, maybe more. There is a chance we'd come out ahead, but it would mean A LOT of work. Hopefully we'll never need it!

[Gardening Grandma]

Mar 27, 2011 11:09:01 GMT -5 Poppet said:

Where are you going to get the 63K deductible should, God forbid, an earthquake majorly damage your home? Borrow? Savings?

If your home is totalled in an earthquake, and you don't have earthquake coverage, where are you going to get the money to replace it?

[tskeeter]

I think Dark's got the idea. How far are you from the nearest fault line? (Check out the National Geologic Survey web site for fault maps for your area.) If your home was completely destroyed, could you replace it without quake insurance? Would that kind of natural disaster create a financial crisis/disaster for your family?

Some other things to consider. The quake scientists say that the San Andreas is past due for a major quake. Many of the projections are for a stronger quake than the 1906 San Francisco quake within the next 20 -50 years. I'm not a geologist, but I suspect that significant movement along the San Andreas, could cause quakes along other fault lines. Your home is 30 years old. Construction standards and building codes of that time did not require the "quake proofing" that is put into a new home today. So your home is likely to sustain a lot more quake damage than a newer home. In the event of a major quake, the cost of repairing or replacing a home will skyrocket in the area around the quake zone. So if the replacement cost of your home today is $300K, after a quake, it could cost from 25% to 50% more as construction material and labor will be in short supply.

I live on the east slope of the Sierra's. I carry quake insurance.

[TD2K]

Construction standards and building codes of that time did not require the "quake proofing" that is put into a new home today. So your home is likely to sustain a lot more quake damage than a newer home.

You might be able to retrofit your house to better stand a house. Things like anchoring the house to the foundation to better withstand the shaking caused by an earthquake are an example of what can be done.

[cronewitch]

I don't have it because of the limits and deductible. My friend had a half million dollar house with 50K deductible and it was damaged in a quake. By the time they don't cover some things the damage was less than the deductible but still cost them more than 50K to repair the house.

I live in a brick house that has been through a few quakes and not damaged. Unless it had a fire from the quake it could fall down without causing as much damage as the deductible if it doesn't cover the bricks.

My equity is about what the deductible would be so maybe I would just walk away, but I wouldn't do that. I would fix it the best I could as cheap as I could or sell it for what I could and buy a different house paying off this one or paying cash for the next one.

Most houses even in a major quake aren't destroyed just damaged.

[simser]

When I lived in St. Louis we bought earthquake insurance after we had a very small earthquake hit. Is there anyway to lower that deductible (say another $100/ year?). I'd get it regardless- better safe than sorry!

[mithrin]

Historically, single story wood frame houses in the US tend to survive quakes. Very few are completely destroyed--so if you're not very close to a fault line, or live downstream of a dam that could break and flood your home, then your risk of total loss is pretty minimal. This is reflected in the relatively low cost of your insurance. The insurance companies know that masonry takes damage from quakes (too stiff), which is why they exclude it from coverage. They know that wood frame buildings survive shaking (wood frames have more give--wood can flex and joints can shift to accommodate shaking). Minor damage is common in areas of high shaking, and interior fixtures and plumbing can sometimes be damaged. Hence the high deductible on quake insurance.

While I was getting my Geology degree in Southern California (less than 15 miles from SAF), I did not carry quake insurance. We had a single story wood frame house, and it had been tied to the foundation to prevent the house from shifting off the foundation--one of the more common and costly results of a quake for these types of houses. I would consider forgoing the insurance and instead put some money into retrofitting the house. Tieing the frame to the foundation, and putting in plywood sheets to reinforce cripple walls if you have a crawlspace will go a long way to reducing your potential damage in a quake. You also need to read the policy carefully--when you say your house is worth 300K, is that the cost of the structure, or the land + structure? Most insurance will only cover the value of the structure itself, what is the replacement cost of your structure? It may be quite a bit less than the 300K, and the policy might limit the total payout based on it.

Last note, if you haven't already, please take the time to secure the interior of your house. Most injuries in wood frame single story houses come from falling objects and debris on the floor rather than structural failure. Move any heavy objects out of range of the beds, so that you don't get hit in the head during a nighttime quake by a heavy picture frame or a cascade of books from the bookshelf. Keep footwear in the bedroom so that you won't be walking barefoot through broken glass (from picture frames) or other debris after the quake. Install earthquake straps to all tall furniture like bookshelves and dressers to keep them from falling over. They even have special hooks for picture frames now that prevent them from coming off the wall during shaking. Most of the indoor stuff is inexpensive and easy to do yourself. Hardware stores carry earthquake kits and USGS and others have good resources online to help you identify the hazards inside your home.

[❤ mollymouser ❤]

The $63,000 deductible is determined by the California earthquake authority, based on a number of factors (value of the home, type of construction, distance from known fault lines, etc); paying a higher premium wouldn't impact the deductible or the coverage.

What the heck, we're already paying $365 for flood insurance and don't live in a flood plain, so what's another $216 for coverage for a ginormous earthquake?

[❤ mollymouser ❤]

Interesting, from what I've read online, only 12% of California residents who purchase homeowners insurance opt for earthquake insurance. The California Earthquake Authority (CEA) provides about 70 percent of the state's earthquake insurance, which is sold through 16 participating insurers and the California FAIR plan (the state's insurer of last resort for those who can't obtain home insurance in the standard market). The policies include a standard 10 percent or 15 percent deductible; so, for a $400,000 house, a homeowner would have to pay for the first $40,000 to $60,000 in repairs. Earthquake insurance is costly, particularly in high-risk areas. For example, it would cost about $4,300 a year for earthquake insurance for a two-story wood-frame house in the San Francisco Bay area with an insured value of $750,000. That's with a 10 percent deductible and $25,000 in contents coverage.

[TheOtherMe]

I have earthquake insurance and I live in the Midwest. It is really cheap here and is included in my homeowner's policy--along with the sewer back up policy.

[Loopdilou]

We literally live 2 blocks from theone of the most active faultlines in the state and pay about $200 a year for EQ coverage, 10% deductible. It really isn't that bad and, having gone through the '89 quake - worth every penny to me even with a house built with EQs in mind.

[TD2K]

That's a reallly good rate Loop. I've been looking at EQ insurance with Amica up in WA state and it sounds like it's going to be quite a bit more than that, waiting for the rates for various deductibles to come in.

[tskeeter]

mithrin makes some very good points regarding single story, wood frame homes sustaining less quake damage than other types of buildings. They also make some very good points about how to mitigate potential quake damage.

If I was in a fairly high quake risk area, I think I'd seriously consider both quake retro fits to the house and insurance.

[cronewitch]

My earthquake kit is a wrench to turn off the natural gas. In a quake gas fires happen so I keep the correct kind of wrench hanging by the back door. Never turn it off unless you have a real fire or you aren't allowed to turn it back on so need a service call.

Gas hot water tank needs to be attached to the wall. It could fall over in a quake and break a gas line.

[oreo]

I live in So Cal and don't have earthquake insurance. I think it was over $400/year for our house (maybe because it is 2 stories? not sure why it is so expensive). We live sort of near a minor fault line. The house is 50+ years old but we completely remodeled in 2004 so it should withstand a reasonable earthquake (all of the areas that have a 2nd story were completely rebuilt at that time). I've heard that the "experts" think a "major" earthquake in CA would only be around 7 which is big but nothing like the one in Japan. I live only a few miles from the beach but we are on a hill so the tsunami would have to be over 300' before we'd have that issue.

We have attached most of our cabinets (need to do the rest!) to the house into studs. Of course my garage is floor to ceiling boxes which are completely unsecured so that would be a big mountain of trash after an earthquake!

[Peace Of Mind]

Yes, I would get the coverage. Like you, I'm not in a flood zone, however, over 25% of floods are not in flood prone areas so I err on the safe side. I would do the same with the earthquake coverage as that is a very reasonable rate.

[msgumby]

We decided against it when we bought our house. We are young, and could recover if we did have a total loss. Also we are good savers, so could somewhat self-insure against something major. We also figure that a large amount of our property worth is in the land, not the house, so the actual cost to rebuild would not be that much. When we looked at either having a high-priced plan with a low deductible or a low-priced plan with a high deductible, neither seemed cost-beneficial for us. If we were older or not good savers, I would plan differently.

[msgumby]

Oh - this is northern CA and we live right on a fault line.

[❤ mollymouser ❤]

OK, we played with the coverage options a bit and went for it, as of this morning.

We opted for a 10% deductible, $25,000 in contents coverage, and $15,000 in loss of use/relocation expenses ... for $542 per year.

[Gardening Grandma]

Here's hoping you never need it!!!

[❤ mollymouser ❤]

Amen to that! ;D