Only about ten percent of insured homeowners in California have earthquake insurance. Many homeowners assume earthquake insurance is prohibitively expensive, but they also haven’t crunched the numbers to see whether they could actually afford to repair/rebuild their home without this coverage.
Ask yourself the following questions to see if you need to reconsider buying earthquake insurance. What is your risk profile? How close are you to a fault line? Do you have a slab or a post and pier foundation? Is the home wood frame construction? Is it a “soft story” home (living area built over a garage)? Are you on bedrock or fill? How much equity do you have in your home? Enter your address at www.abag.ca.gov to learn about the soil conditions and quake forecasts where you live Read at least one of the articles by financial experts at www.uphelp.org on equity considerations.
Could you afford to pay out of pocket for repairs/rebuilding? What would you do if you couldn’t? Quake damage often requires engineering fixes which can be very expensive – typically $50k and up. Can you afford a policy with a 10 percent instead of a 15 percent deductible and if so – how much would the damage have to be before coverage would kick in? At what level of loss would the repair/rebuild of your home be an unacceptable financial burden?
Most insurance policies have a 10 or 15 percent deductible. The price and high deductibles for EQ policies have led many people to avoid buying the product, but remember: if you live in a quake-prone region, going “bare” with no insurance means you have a 100 percent deductible…you’ll bear the entire risk yourself.
Can you afford not to have earthquake insurance? A generally accepted rule of thumb is that you should not risk more than 10 percent of your liquid assets. A large earthquake could mean:
10 to 100 percent of your home’s structure could be damaged or destroyed:
Up to 20 percent of your belongings could be damaged
$3,000 a month for temporary rent and relocation costs
Copied from United Policy Holders :”Tip of the Month” email. Questions? Contact me through my website: www.farmers.com/ctrowbridge, , or ctrowbridge@farmersagent.com
UPDATE 3/11/2015 from the USGS
The chance of a magnitude-8 quake striking the state in the next three decades jumped from 4.7 percent to 7 percent, mainly because scientists took into account the possibility that several faults can shake at once, releasing seismic energy that results in greater destruction. While the risk of a mega-quake is higher than past estimates, it’s more likely — greater than 99 percent chance — that California will be rattled by a magnitude-6.7 jolt similar in size to the 1994 Northridge disaster. The chance of a Northridge-size quake was slightly higher in Northern California than Southern California — 95 percent versus 93 percent, according to a report released Tuesday by the U.S. Geological Survey. Because of this knowledge, the odds of a catastrophic quake — magnitude 8 or larger — in the next 30 years increased. There is a 93 percent chance of a magnitude 7 or larger occurring over the same period and a 48 percent chance of a magnitude 7.5 — similar to previous estimates.
The new report included newly discovered fault zones and the possibility that a quake can jump from fault to fault. Of the more than 300 faults that crisscross the state, the southern segment of the San Andreas Fault — which runs from central California to the Salton Sea near the U.S.-Mexico border — remains the greatest threat because it hasn’t ruptured in more than three centuries. The report found there is a 19 percent chance in the next 30 years that a Northridge-size quake will unzip the southern section compared to a 6.4 percent chance for the northern section, partly because it last broke in 1906.
The southern San Andreas is “ready to have an earthquake because it’s really locked and loaded,” Field said. The report is a forecast, but it is not a prediction. Experts still cannot predict exactly where or when a quake will hit anywhere in the world.
