Earthquake Insurance

[Andrew Joiner]

Any one here have it? I've had earthquake coverage for a while. My house has a big glass window wall so that's the main worry. The deductible is $30,000 so it seems like a waste of money. I pay 60% more a year to for it.

[Chris Padilla]

That is why I don't have it: high deductible. It almost doesn't make it worth it. Besides, if the big one does hit and nukes my house, I bet a fire might consume it...and that is covered. ;)

[Scott Donley]

I have it but it is only about 20% of my cost per year. I figure if my house was off the foundation and I had to rebuild it would take all my savings and living on a fixed income no way to replenish it, so worth it to me. If the house was not paid for I might think twice .

[glenn bradley]

That is why I don't have it: high deductible. It almost doesn't make it worth it. Besides, if the big one does hit and nukes my house, I bet a fire might consume it...and that is covered. ;)


You will want to check that very carefully. If the fire is caused by the earthquake, it may not be covered. Damaged drywall and insulation is not covered if caused by flooding in the absence of flood insurance for example. Get a very specific answer from your agent, preferably in writing.

[Steve Peterson]

The high deductible is what keeps me from buying it. Most modern 1 and even 2 story buildings should survive the quake without totally collapsing. The biggest risk would be enough shaking to break all the windows. I figure that the windows could be replaced for less than the cost of the deductible.

To me, it seems like a total scam by the insurance agency. They are required to offer it in California, but they make it so restrictive that it seems like they never pay out.

Steve

[Chris Padilla]

The high deductible is what keeps me from buying it. Most modern 1 and even 2 story buildings should survive the quake without totally collapsing. The biggest risk would be enough shaking to break all the windows. I figure that the windows could be replaced for less than the cost of the deductible.

To me, it seems like a total scam by the insurance agency. They are required to offer it in California, but they make it so restrictive that it seems like they never pay out.

Steve

Exactly. The deductible is so high that I really wonder if I would even come close to it so I've yet to have any EQ insurance.


You will want to check that very carefully. If the fire is caused by the earthquake, it may not be covered. Damaged drywall and insulation is not covered if caused by flooding in the absence of flood insurance for example. Get a very specific answer from your agent, preferably in writing.

If a fire is caused by the earthquake, I am covered. :) I most certainly checked it.

[John McClanahan]

I have it. We have a 2 story brick house that is 125 years old. Mine has the crazy high deductible, too.


John

[Mike Henderson]

In New Orleans after Katrina a lot of homes "caught" fire because the owners had fire insurance but not flood insurance. Some of the homes were torched by looters so just because the fire was arson did not prove that the owners set it. But the insurance companies resisted paying for fire loss after the flood.

Mike

[Bert Kemp]

Funny how this subject came up today as we had 2 earthquakes last night epic center my back yard LOL Lucky they were small 4.1 but gives you a good shake for sure. I don't have Ins for it either.

[Andrew Joiner]

I have it but it is only about 20% of my cost per year. I figure if my house was off the foundation and I had to rebuild it would take all my savings and living on a fixed income no way to replenish it, so worth it to me. If the house was not paid for I might think twice .
That's odd Scott if you live in University Place, WA that's a zone 3 like Portland OR. I'm in a zone 2B so it's not as bad for predicted damages as zone 3.
60% more for me is only $155 year.

The high deductible is what keeps me from buying it. Most modern 1 and even 2 story buildings should survive the quake without totally collapsing. The biggest risk would be enough shaking to break all the windows. I figure that the windows could be replaced for less than the cost of the deductible.

To me, it seems like a total scam by the insurance agency. They are required to offer it in California, but they make it so restrictive that it seems like they never pay out.

Steve
I tend to agree Scott. I built my house to code in 2002. It's 35'x35'x 30' high all open no rooms just lofts so I had to pay an engineer to draw the details. It's sort of a post and beam but welded steel. I built the 30'x25'window wall for $8k in materials but had a bid for $32k from a window company. I could do all the windows for less than 30K today, I think. I'd have to rent a big man lift and after an earthquake the waiting list would be long!

I bet bids in a worse case for me would be-
All windows replaced 45k. All the welds need to be exposed and inspected 3k. If rewelded 20K. The polished concrete floor may crack, to replace it now all lofts would have to come out 50k. The city may require permits 3 to 5K.

[Rick Potter]

I gave it up. I may be wrong, but, as I read the policy there is an immediate 20% deductible, and then after that, comes a list of what is not covered anyway. Things like block walls, masonry (so long brick fireplace) which may or may not include the stucco walls. These are the things that are usually damaged in a quake, so I will have to take a chance.

The people I feel sorry for are the ones we see with regularity on the news, who don't even know they live in a flood plain until it happens.


What really gets to me are the new insurance policies being written which recently changed my deductible from $1000 to 10%, which in my case is almost $7000. This is from State Farm, but I am told it is the up and coming 'new normal'. Of course, this pretty much eliminates all claims which are less than catastrophic.

[Wade Lippman]

Of course, this pretty much eliminates all claims which are less than catastrophic.

Properly used, insurance only covers the catastrophic. I have the highest deductibles I can get on everything. (Except health insurance where I have a platinum plane. Unless you have no medical issues at all, the cheaper plans end up being more expensive. Go figure)

[glenn bradley]

If a fire is caused by the earthquake, I am covered. :) I most certainly checked it.

Excellent. Too many folks assume and end up sorry.

[Evan Patton]

We moved to the Bay Area a couple years ago. I considered earthquake insurance at the time and due to the 20% deductible and ~2.5x premium multiplier decided to take the risk without it. When the Napa quake hit a few months ago I started reconsidering, as we live a few hundred yards from the Calaveras fault. I came to the same conclusion. If the big one hits and totals my house, it will be devastating. I don't know if I would be able to afford to rebuild, if so, it would significantly affect my savings. That being said, I still think I'm better off saving the money. And yes, I am covered in case of a fire following an earthquake.

[Steve Peterson]

What really gets to me are the new insurance policies being written which recently changed my deductible from $1000 to 10%, which in my case is almost $7000. This is from State Farm, but I am told it is the up and coming 'new normal'. Of course, this pretty much eliminates all claims which are less than catastrophic.

Isn't protection from catastrophic loss the primary purpose of homeowners insurance? I don't really see the point of insuring minor expenses. I can afford the $100 cost of a tow truck and don't want to be charged $12 every 6 months for towing insurance. However, 10% of the value of a home seems excessive. Are you saying that the deductible for a $1M house would be $100K? That is high enough that many people may decide to walk away from the house rather than be bankrupted by it.

Steve

[Rick Potter]

Sorry Steve, I meant to say 1.0%, and I cannot correct the above post. In my case, I went from having $1,000 deductible, for all losses, to 1% of covered value of the home. The covered value of my home is $626,900, making my new deductible $6,269, before the insurance will cover any loss.

I complained about it to my insurance company, and they lowered the deductible to $5,000 for the next year, but charged me $34 for it. They said they would probably not do that in the future. Interesting result was that my total bill for the year went down $2.00, of course that was before the $34 surcharge . Whoopeee.

To answer your second question: A $1,000,000 house would have a $10,000 deductible. Interesting also, my first house cost me $13,000.

Note: This is a homeowners policy, not earthquake, which I also mentioned in the original post.

[Evan Patton]

Isn't protection from catastrophic loss the primary purpose of homeowners insurance? I don't really see the point of insuring minor expenses. I can afford the $100 cost of a tow truck and don't want to be charged $12 every 6 months for towing insurance. However, 10% of the value of a home seems excessive. Are you saying that the deductible for a $1M house would be $100K? That is high enough that many people may decide to walk away from the house rather than be bankrupted by it.

Steve
Steve,
I'm not sure what to think about the actuarial science on this one. Either I'm pretty stupid for underestimating the risk, or the insurance companies are using us to hedge. And yes, being in CA I'm looking at a >$200k deductible on top of paying >2.5x my regular annual premium (which already has a high deductible, because in CA insurance companies can choose to drop you if you actually file a claim so you might as well pay for roof damage and broken windows yourself).

Evan

[Jack Lemley]

Steve,

Google northridge earthquake residential damages and you'll find the damage estimates exceeded $13 billion. At the time there were few if any insurance carriers that could have survived financially had they had a significant portion of the market insured for earthquakes without very high deductibles and multiple excluded damages, etc. Those costs would likely be 2 or 3 times higher today. California is one of the most heavily regulated states for an insurer to operate in so the reality it is quite possible things you blame on the carrier should be placed on your state government instead. Insurance use actuaries and loss experience (among other things) to determine premium cost. It is not a "scam" but rather a calculated risk. The state mandates reserves for potential losses. Reserves cannot be invested or otherwise used by the carrier, otherwise they wouldn't be reserves. If you had insurance with a carrier who provided you with all risk coverage and a 1% deductible (and also had say 15% of the market in that area) and the big quake hit your area you would not be able to collect because the carrier go belly up so fast your head would spin. Insuring against potential loss is much like shooting craps in Vegas. If I had a $million+ house in California a $30,000 deductible would be pretty nice in the event I had a total or near total loss. You want to play the tables with no net that is your prerogative but don't accuse the insurance companies of running some sort of "scam" because you think the premium, deductibles, and exclusions are too high or too many. Don't buy it but either way get your facts right and stop throwing around unsupportable accusations.

Off my soap box and will say no more about the subject.

Jack


The high deductible is what keeps me from buying it. Most modern 1 and even 2 story buildings should survive the quake without totally collapsing. The biggest risk would be enough shaking to break all the windows. I figure that the windows could be replaced for less than the cost of the deductible.

To me, it seems like a total scam by the insurance agency. They are required to offer it in California, but they make it so restrictive that it seems like they never pay out.

Steve