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Pros and Cons on Cal. Earthquake Insurance

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Replies to: Pros and Cons on Cal. Earthquake Insurance

  • ScienceGirlMomScienceGirlMom 413 replies23 threadsRegistered User Member

    ucbalumnus wrote: »
    The Northridge quake in 1994 was the event that caused insurance companies to flee the earthquake insurance market, since earthquakes are very rare events that have the potential of causing large losses at one time (as the Northridge quake did), making it difficult to assess insurance risks on them

    The insurance companies definitely mis-calculated the risk. We paid the $150 annual premium twice, and then got slammed by the earthquake for a full payout. I always say that the earthquake insurance policy purchase was the best gambling risk that I ever chose to take. :smile:

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  • artloversplusartloversplus 8538 replies247 threadsRegistered User Senior Member
    @jym626

    CEA is the gold standard for earthquakes insurance in CA. It costs the most but because it’s government sponsored so it is told the most likely will be paid out in case of the big one hits. There are other private EQ insurances but it might not survive after the big one.
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  • jym626jym626 55296 replies2877 threadsRegistered User Senior Member
    ^thanks
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  • mom60mom60 7826 replies504 threadsRegistered User Senior Member
    We have earthquake insurance on our house. $2000 a year premium,I’m not sure what the terms of the policy are. My H said every year he thinks about cancelling it. Our house is securely bolted to the foundation. Our lot was regraded and compacted when we built our present home. My H doesn’t think we will have a problem. We also have two large water heaters that would be useful if water lines were broke.
    Prior to the Northridge quake earthquake insurance was fairly inexpensive. The business I worked for had a lot of damage to properties in LA with the Northridge quake. The insurance company paid for a lot of the repair work. Since that time the premiums have risen to a point it isn’t affordable to have coverage.
    I know the city of Los Angeles and Santa Monica are requiring retrofit work on a lot of properties.
    I’ve been thinking about earthquake preparation since the last quakes. I don’t think my children who all live in California have any earthquake supplies on hand. My H has tried to get them to always have a decently full tank of gas. We have learned even with the wildfires that power can go out. No power means no gas pump working and no way to get cash from the ATM.
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  • HImomHImom 34193 replies391 threadsRegistered User Senior Member
    I don't think folks can afford NOT to have earthquake insurance in case there is major damage. You don't want to have to consider monster loans in addition to dealing with lots of losses, IMHO. It does feel like throwing money away on premiums when I write the check, but I'm afraid not to so we we keep buying hurricane and flood insurance (hope to never make a claim).
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  • artloversplusartloversplus 8538 replies247 threadsRegistered User Senior Member
    After my parents survived the Loma Prieta earthquake of 1989, or San Francisco earthquake of 1989, we have kept the earthquake insurance ever since. The house, now I have inherited, is sitting on the San Andres Fault, less than 10 min. walking from the Crystal Spring. The house was not damaged in the quake. I am also debating whether should I cancel the insurance.
    Incidentally, few years ago, I tried to hawk a piece of vacant land in San Bruno and found out that the Loma Prieta earthquake of 1989 cause a earth crack in middle of the property. In order to build on it, you have to build 40 feet each way away from the crack. That gave the last blow to a client who was interested. Today, I am still wonder if that building code does any thing to the future earthquakes, the quake will open up the ground wherever it wanted, 40 feet from an old crack does nothing to prevent the new building falling down.
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  • jym626jym626 55296 replies2877 threadsRegistered User Senior Member
    My DS’s argument against earthquake insurance is that the biggest value is the land, not the cost of rebuilding. And with a big deductible anyway plus the annual cost of the premium he felt it wasn’t worth it. Not sure I agree, and no idea if his mortgage company made him buy it, but he hasn’t mentioned that.
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  • ucbalumnusucbalumnus 77680 replies678 threadsRegistered User Senior Member
    Whether a house's rebuild cost is large relative to the land value varies. However, earthquake insurance should be priced on rebuild cost, not property value. Whether the owner may want to buy it depends on whether s/he can afford the rebuild cost, or just the deductible, or neither, in addition to how s/he sees the risk relative to the premium cost.
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  • bluebayoubluebayou 26685 replies174 threadsRegistered User Senior Member
    we dropped our EQ insurance, for the reasons mentioned in the article. But we also have a ~1980 home wood-structure home, bolted to the foundation. The most likely damage will be from collapsing chimneys, both in rooms with cathedral ceilings.
    I think most California homeowners don’t buy earthquake insurance policies because they are making an intelligent, rational decision,” said Joe Ridout, California legislative advocate for Consumer Action.

    “Usually, damage from an earthquake will be less than a 15% deductible, which would mean that you’re self-insuring anyway,” he said.

    “And in the event of a massive earthquake near a population center, it is quite conceivable that the CEA would run out of money and fail to make you whole even if you were a policyholder.”

    https://www.latimes.com/business/lazarus/la-fi-lazarus-earthquake-insurance-20190709-story.html

    Th
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  • mom60mom60 7826 replies504 threadsRegistered User Senior Member
    @bluebayou Exactly the reason my H gave me.
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  • artloversplusartloversplus 8538 replies247 threadsRegistered User Senior Member
    Only 10% of Californians bought the EQ insurance. For those who did not, because the reason stated above. Who ever bought it, just for a peace of mind, it is not reality check.
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