Saturday, July 13, 2019

EARTHQUAKE!!! Should You Get Insurance?

You Ask Yourself:  Do I need earthquake insurance?

Let's try to make this clear and simple:

1.  Homeowner insurance does NOT cover direct loss from earthquake.  Period.  Either you have earthquake insurance and you're covered or you don't and you're not covered.  Simple.  Without earthquake insurance you are on your own.  However, in California, state law requires that Fire damage be covered by the homeowner policy if it is the result of an earthquake.

2.  Earthquake insurance is generally NOT cheap.  Usually around the same as your home insurance or more and occasionally less.  With that ballpark figure in mind, can you afford it?  If it is outside your budget then put your thought, money and time into preparedness and prevention.  Forget about the insurance.  If there's an earthquake and you have damage then earthquake insurance is a great deal.  If you never sustain any earthquake damage, well, it seems to be a waste of money.  Again, if you can afford it, get it.  

3.  Earthquake insurance deductibles are high, usually 10% - 15% of your Coverage A Dwelling Replacement Cost on your homeowner insurance policy.  Pull out your home insurance declarations page.  Look at Coverage A.  Let's say it's $400,000.  Your earthquake deductible will be $40,000 - $60,000.  The first $40k - $60k of damage is all yours to repair on your own.  

Other causes of loss, such as wind and hail and hurricane and fires, etc. happen often enough that insurance companies can figure the probabilities pretty well and set aside enough funds.  However, earthquakes that cause damage are few and far between and seldom result in claims, partly because of the very high deductibles on EQ insurance.  For instance many of you felt the 7.1 Ridgecrest quake.  There have been thousands of foreshocks and aftershocks of that quake.  On July 10th there were 6 earthquakes around Ridgecrest of magnitude 4.0 or greater;  in one day!  But there were very few claims.  How do you predict and how do you figure?  It's not so easy with earthquakes.

Earthquakes are going to happen.  Maybe earthquake insurance should be mandatory in southern and central California.  In the meantime you can work on earthquake preparedness and have your home checked for earthquake retrofitting.  Some experts say that you should sink your money into retrofitting your house before worrying about earthquake insurance.  Maybe so.  But there's still no substitute for having earthquake insurance.

Bet you didn't see this one coming:  When there has been an earthquake recently in your area, most insurance companies will stop offering earthquake insurance until things calm down.

Why?  Insurance is for accidental losses which is further defined as sudden, unforeseen and unexpected loss.  You can't buy life insurance if you are diagnosed with a terminal illness.  You can't buy fire insurance if there is a forest fire near your house.  If the loss is certain to happen, it is no longer an accidental loss.  However, California Earthquake Authority does not have that restriction.

But there's a catch to using the CEA.   Your home insurance company must be a participating member of CEA in order give you access to CEA insurance.  Only a handful are members.  If your home insurance company is not a member company then your company must offer it or you have to go elsewhere to get EQ insurance, but you can't get it through CEA.  Sound complicated?  You should see it from my end.  Oy!

Call me now (626) 584-6303 or use the quote form to get a quote and I will check which companies are available and which are closed.

For more information:

Here is the California Department of Insurance website page on Earthquake Insurance

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