Earthquake Insurance

[crazy30]

We live in the bay area (hello earthquake!) and the earthquake insurance is really expensive (same amount of the home insurance) Is it advisable to get one? (hopefully some fellow here also lives in the bay area)

[Lanthiriel]

We live in Anchorage, Alaska and we have it. Our total insurance bill is only $900 for the year, though, which is about what we had budgeted even without earthquake insurance, so we decided it was worth it. We've had a couple of 5s and 6s since we've lived here, and just had the 50th anniversary of the 9.2 that leveled most of downtown...

[Exflyboy]

If (when) we get the big Cascadia subduction zone 9.0+ that is going to flatten everything south of Seattle.. How much do you think said insurance companies will shell out?

How many found they "weren't covered" by State Farm after Katrina?

This will be far worse in my opinion so if everything is flattened the well be dry by the time the get to send you your check.

Just my humble (if not very cheerful) opinion

[Another Reader]

I live in the Bay Area.  My soil is good, with bedrock near the surface (up in the hills).  My house was brand new when the 1989 Loma Prieta earthquake hit and I had no damage.

However, every earthquake is different, and there is no way to predict where the shaking will be strongest.   I would expect some damage from an 8.0 plus on the San Andreas fault and possibly more severe damage from a mid 7's on the Hayward fault.  Do I buy earthquake insurance?  No.  The deductible will cover much of the anticipated loss at 10 percent for a serious quake.  No doubt some government subsidized loans would cover the rest.  If the quake is catastrophic, there's not enough in the pot to pay out the claims, no matter how the risk has been spread. 

[spud1987]

I live in the Bay Area.  My soil is good, with bedrock near the surface (up in the hills).  My house was brand new when the 1989 Loma Prieta earthquake hit and I had no damage.

However, every earthquake is different, and there is no way to predict where the shaking will be strongest.   I would expect some damage from an 8.0 plus on the San Andreas fault and possibly more severe damage from a mid 7's on the Hayward fault.  Do I buy earthquake insurance?  No.  The deductible will cover much of the anticipated loss at 10 percent for a serious quake.  No doubt some government subsidized loans would cover the rest.  If the quake is catastrophic, there's not enough in the pot to pay out the claims, no matter how the risk has been spread.

I chose not to purchase earthquake insurance here in the East Bay. I do worry about a Hayward fault quake since we are about 10 miles from the fault. But the bank currently owns about 80% of my home  and so I am really insuring the bank at this point. If the worst happened and our home was flattened I would just mail the keys to the bank and eat the 20% down payment and deal with a black mark on my credit history (ie let the bank foreclose). If the damage is less than catastrophic I would just pay for the repairs. After all, insurance would only cover above the deductible, so I would still be out around 100k even with insurance.

[cheddarpie]

I live in Seattle and I don't have it. It would double my annual insurance costs and the deductible would be so high that I don't think it's worth it. My house was built in 1902 so has survived a lot already -- if it goes with the "big one," it will likely be a total loss, which would be horrible but I am Ok with the risk. Most of my value is in the land, which hopefully will still be here and if it's not then I have much bigger problems!

The other issue is retrofits -- My house is not eligible for earthquake coverage without getting retrofitted, which would be a five-figure job. When I bought my house, I talked to the inspector at length about this question and he said that during the Nisqually quake in 2001, houses that were retrofitted fared much worse than those that weren't because they couldn't absorb the shaking. I have no idea if that's an accurate assessment, but it sounded like what I wanted to hear so I believed him. :)
 

[crazy30]

Thanks everyone! I will just sock away to savings the 800$ quote for the earthquake insurance! The truth is I haven't met anyone I know who has it but I got paranoid that maybe I was asking the wrong people. Love love this forum!

[cchrissyy]

I didn't buy it, because my insurance company confirmed that if the house were destroyed by a fire, which had been caused by an earthquake, that it WOULD BE a covered fire. And that was my actual concern.

[Turkey Leg]

How many found they "weren't covered" by State Farm after Katrina?

I thought homes in Katrina were mostly damaged by flood? If so, that would mean the uncovered people didn't have federal flood insurance. I don't have flood insurance myself (not located near water), but I did check into it first to be sure I didn't need it. https://en.wikipedia.org/wiki/National_Flood_Insurance_Program

[Dicey]

IIRC, the insurance didn't cover the first 25% of the loss or something crazy like that. Perhaps it's changed, but we voted no. We're self insured for earthquakes, lol. If something catastrophic happened and the house was destroyed, the residual land value would still be substantial. Since we have no mortgage, we could just sell the land and move into one of our rental houses, which are located in SoCal. Unless of course, the predictions come true and the whole damn state falls into the ocean.

[Flyingkea]

In Christchurch New Zealand , there was a few big Earthquake a few years ago, and there the insurance companies have done everything under the sun to avoid paying out. There are people now, 4 years later who are still fighting the insurance companies to get a payout, while living in broken homes and this is with EQC covering the first 100k on property, and 20k on contents.

There's also the cost of repairing the land after an earthquake, - liquefaction can do quite a bit of damage.

I guess whether you get it depends on likely you think a big one will occur, and whether you can bear the cost should the worst case happen.

[NoraLenderbee]

The deductible (in CA) is not 10 percent of the damage--it's 10 percent of the value of the house. If your house is worth $600,000 (an ordinary home in the Bay Area), your deductible is $60,000, no matter how much the damage actually costs. That makes earthquake insurance not worthwhile for me.

[crazy30]

The deductible (in CA) is not 10 percent of the damage--it's 10 percent of the value of the house. If your house is worth $600,000 (an ordinary home in the Bay Area), your deductible is $60,000, no matter how much the damage actually costs. That makes earthquake insurance not worthwhile for me.

wow! I did not know this! Thanks!

[Another Reader]

Actually, it's 10 percent of the replacement cost of the building.  If you are insured at $600,000, that's what the insurance company projected as the cost of replacing the house.  A ten percent deductible would mean you would have to incur repair costs of more than $60,000 before the insurance kicks in.  If you lose your fireplace, have to rebuild or repair some walls that twist out of position, patch or replace sheetrock and stucco, redo some plumbing and repair damage from leaks, replace a furnace that topples over and fix that sort of damage, you might hit $100k. 

My father always said if you live in fire and earthquake country, maximize your mortgage.  When the SHTF, partner with your "friends" at the bank to get major damage repaired, as their interests are aligned with yours.  If there is too much damage and not enough money, let them have the property and minimize your loss.

[jba302]

How many found they "weren't covered" by State Farm after Katrina?

I thought homes in Katrina were mostly damaged by flood? If so, that would mean the uncovered people didn't have federal flood insurance. I don't have flood insurance myself (not located near water), but I did check into it first to be sure I didn't need it. https://en.wikipedia.org/wiki/National_Flood_Insurance_Program

This is true. Most denied claim damage was flood related, or claims were denied because it was impossible to determine that a house was primarily damaged by a hurricane when it was clearly also a total loss from the flood. Losing a roof to wind followed by having a flood to the rafters is so extremely uncommon that insurance companies were ill prepared for it anyway. Maybe not building a house under the water line would have been a smarter move, but this is why companies pulled away from these areas and the coverage is wicked expensive.

State Farm specifically did some incredibly shitty / outright fradulent things, like file false reports and bury real ones to refuse coverage.

[TrMama]

We live on Vancouver Island and carry earthquake insurance on our house. I'm worried about damage from shaking, landslides (the most common type of earthquake-related damage here, and/or tsunamis.

The deductible varies pretty widely, depending on the insurer. When I shopped our insurance last spring I learned that we actually have one of the lowest earthquake deductibles around. I it's only $15K (for a $800K insurance policy, home and contents combined). Most of the other companies would only do a $70K earthquake deductible.

So, we pay slightly higher premiums, but in the event of the big one (or not so big one in this case), we won't be completely wiped out.