Any renters have earthquake insurance?

[ultros1234]

DW and I recently changed our renter's policy and got the obligatory California letter offering us earthquake insurance. To my surprise, it wasn't insanely priced. We live very close to the long-overdue-for-the-big-one Hayward fault in Oakland.
http://www.earthquakesafety.com/earthquake-hayward-fault.html

Do you any of you California mustachian renters carry earthquake insurance?

I'm thinking there's two big categories of what could happen in a major earthquake:
1. There's some serious shaking. All our plates and glasses break, TV falls down and breaks, glass tables break maybe some furniture gets torn. A few thousand dollar of damage.

2. Our 1960's era triplex apartment falls down and all our possessions are destroyed. Replacing everything -- that's a proposition in the tens of thousands, probably.

I am not concerned with insuring against earthquake #1. It's #2 that's scary. Aside from a big financial loss, if the Big One really does hit, it would be a nice moment to have free liquid assets to reinvest in suddenly-below-market Bay Area real estate.

Thoughts?

Coverage limits, deductible percents, and annual cost:
$50k coverage
- 15% $113
- 20% $89
- 25% $71

$25k coverage
- 15% $60
- 20% $49
- 25% $41

[MrFrugalChicago]

Am not a renter, but was for a long time.

I always added up the values of all of the junk in my house. If literally every thing was destroyed, I would be out some money (10k? 15k?)... but after deductibles and such, never found it worth it to get renters insurance for my stuff. Like the computer I am typing this on cost $1500, but 5 years ago.

How much actual stuff do you have? Do you want to spend your time taking pictures and whatever else to catalog for the insurance company? Do you get replacement value or New replacements?


 Let's assume you can come up with 25k in stuff (which is a lot, I don't think I can get up that high):

To Buy 25k coverage with 25% deductible for $41 per year. For all intents and purposes, this coverage will pay out $18,750 for the 25k in damages. Since your deductible is only $41, your payout -> premium ratio is 457:1.  So basically if you had 1 of these events every 457 years, you would come out even (if they happen more than once per 457 years you win, if less than once per 457 years you lose).

Seeing how cheap this is, the insurance company does NOT expect it to happen. The ratio for something like "My house burns down" is much more like 30:1 or 50:1.

So if it helps you sleep better at night, it is pretty cheap to get the $41 coverage.  But seeing as how the insurance company is saying there is at least 457:1 odds of it happening in a given year, I would be able to sleep pretty soundly without it.

[TheNick]

I always added up the values of all of the junk in my house. If literally every thing was destroyed, I would be out some money (10k? 15k?)... but after deductibles and such, never found it worth it to get renters insurance for my stuff. Like the computer I am typing this on cost $1500, but 5 years ago.

This would be the boat I'm in as far as any type of renters insurance goes as well.  I have a 10 year old living room set, a 30 dollar kitchen set from Walmart, a 6 year old bed, and a 1,000 dollar six year old computer.  After you factor in the premiums for all the years I don't actually use the coverage, the deductible if I ever need it, and the fact that I paid maybe 4k for everything in my place counting all my clothes and stuff when it was new and its probably worth 1/4 of that now...its just not worth it to me.

Yeah I'd hate to lose all my stuff but that's why I have an emergency fund, everything but my dog is replaceable so if something happened I'd just grab the pooch, get out, and buy new stuff the next day.  If I had a gun collection or some antique furniture that had some significant value I'd probably insure it, but I don't really have anything of the sort.

[Another Reader]

Having known someone that lost everything, including a car, in the Northridge earthquake, I would "self insure" by not living in a 1970's or earlier building built over carports.  It's the cheaply constructed apartments over unreinforced carport parking that suffered the worst residential damage in that and several other earthquakes.  Single story, wood frame buildings properly anchored to the foundation generally hold up better than other types of construction.  I would also consider the soil in deciding where to live and whether to insure.  Soil that will liquify presents a much larger danger than bedrock.

[aFrugalFather]

Seems like all good suggestions thus far.  Live in a sound place and that could save your life and your stuff.  I'm of the mindset that insurance should protect against catastrophic occurrences that would ruin you if not protected against, and losing my material possessions isn't in that category.  Although as a home owner, if my entire house was destroyed that might be catastrophic as well, but here in CA the land is often where the real value in RE is anyway.  My 2 cents. 

[lbmustache]

I never did - but as a renter the value of all my possessions was (and probably still is) less than $10k. Most of my furniture is IKEA lol.

[trailrated]

An earthquake would be great for business for me lol.

[Helvegen]

I have an earthquake rider on my renter's with a $750 deductible. Worth it me because I know the stuff would cost well north of $10k to replace plus I get the benefit of loss of use coverage. I'll probably need it when I am forced to move out of state and start over again because I have no house or job.

It is fascinating to me how many people here don't have earthquake insurance, homeowner or renter. I barely pay anything for the rider (yearly premium is $174 with the coverage), so I don't get what the big deal is to not have it for renters. Homeowners I realize that is a different ball of rice.

[ctardi]

I used to carry it when I needed loss of use coverage. I now have family close by that my wife and I could move in with if a disaster were to occure. (They're far enough away that it wouldn't affect them.)

[ultros1234]

Thanks everyone! I am leaning towards getting the coverage at a pretty high deductible limit.

To Buy 25k coverage with 25% deductible for $41 per year. For all intents and purposes, this coverage will pay out $18,750 for the 25k in damages. Since your deductible is only $41, your payout -> premium ratio is 457:1.  So basically if you had 1 of these events every 457 years, you would come out even (if they happen more than once per 457 years you win, if less than once per 457 years you lose).

This apartment building is getting leveled by an earthquake sometime in the next 450 years for sure. I don't think we would have any trouble tallying up $25k worth of stuff -- if you're counting the cost to replace it all new. That's a question I should ask the insurance company before purchasing.

Our building probably isn't the safest -- our engineer friend tells us that in buildings like ours, the bottom floor tends to collapse in the quake. We're on the top, so his best guess is that we would collapse onto the unit below. "Don't move downstairs," he said. But it's an absurdly good rent controlled deal in crazy-priced Oakland. The "premium" to self-insure by moving would be much higher.

[soupcxan]

Insurance is for catastrophic stuff; replacing $25k of personal property is not a catastrophe. I pay $175/year for a $1,000,000 umbrella policy...I would not pay $113/year for $37,500 of property coverage that is limited to just one peril (EQ).

[Helvegen]

Insurance is for catastrophic stuff; replacing $25k of personal property is not a catastrophe. I pay $175/year for a $1,000,000 umbrella policy...I would not pay $113/year for $37,500 of property coverage that is limited to just one peril (EQ).

I thought an umbrella was a liability only coverage?

[MrFrugalChicago]

Insurance is for catastrophic stuff; replacing $25k of personal property is not a catastrophe. I pay $175/year for a $1,000,000 umbrella policy...I would not pay $113/year for $37,500 of property coverage that is limited to just one peril (EQ).

I thought an umbrella was a liability only coverage?

That is how it usually works, people see the word umbrella and don't bother to check what it really covers ;)

[ysette9]

As a note for anyone with insurance on their personal possessions, I highly recommend that you photograph everything of value and store the photos offsite somehow (cloud, external drive at work or in a safe, etc.). I had family members who recently were robbed of a lot of valuable possessions and the insurance company initially was going to cover nothing because they couldn't come up with any photographic proof that they owned X hammers and Y iPods and the like. After a lot of fighting they did get a settlement out of the insurance company, but that is the kind of hassle you don't need to go through when dealing with a disaster.

[ultros1234]

And to close the loop on my own process, turns out that the coverage is only for depreciated cost, not replacement.

Being a good mustachian, we have a lot of things that are used or that we have kept for a long time, so their book value is quite low -- even though they would be expensive to replace. No way I could get near $25k of actual book value. Wah wah.

[soupcxan]

Insurance is for catastrophic stuff; replacing $25k of personal property is not a catastrophe. I pay $175/year for a $1,000,000 umbrella policy...I would not pay $113/year for $37,500 of property coverage that is limited to just one peril (EQ).

I thought an umbrella was a liability only coverage?

That is how it usually works, people see the word umbrella and don't bother to check what it really covers ;)

My point was that being sued for $1m is a game changing event. Losing $25k of household furnishings is not.

[ultros1234]

I think most people, including me, would find losing $25k worth of household items, including everything I own, a life-changing event.

Even laying aside the emotional impact (which one can't insure against), the 'stash is mostly in sheltered retirement accounts. $25k would about clean me out of easily accessed liquid funds.

[soupcxan]

I think most people, including me, would find losing $25k worth of household items, including everything I own, a life-changing event.

Even laying aside the emotional impact (which one can't insure against), the 'stash is mostly in sheltered retirement accounts. $25k would about clean me out of easily accessed liquid funds.

I was only talking about the financial impact. On the road to 750k or 1m, losing 25k is a speed bump not a derailment. Heck, if you have 1m, daily market fluctuations will frequently be more than 25k. It's just not that much money in the long-run.

And emotionally...it's just stuff. Losing a loved one is a life changing event. Losing a bunch of stuff in my house would be upsetting but I'd get over it pretty quick.

[CanuckExpat]

I agree with soupxcan. I'm not a fan of contents insurance. Stuff can be replaced. If you are worried that it can't be, you have too expensive stuff.
The insurance is a waste of money.

We've had renters insurance when it has been required by a lease, but I think the only useful part is against liability.

Also for what it's worth, we own a home in California, we opted out of the earthquake insurance.