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OK, so then who here buys earthquake insurance?

Vincerama2

Vincerama2

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Wow, I just wrote an amazingly huge post and it disappeared. I hate this laptop.

Anyway, who pays for earthquake insurange here?

Here's what I pay; $900/year for $290k of coverage with a $43k deductible. What a complete rip-off, however, almost all my money is tied into this stupid termite infested shack, and I can't afford much more than $43k to rebuild a new shanty.

Any other suckers out there?

V
 
$900 a year doesn't sound half shabby... but the $43k deductible? That's basically your house falls down and needs to be completely replaced. Hopefully it covers everything associated with that though, including removal of old house, replacement of possessions, rebuilding of new house (including bringing everything up to current code) by someone other than you :D.

Was it that low because of that much of a deductible I'm guessing? I wonder what a 20k deductible would cost...

Lets just hope you never have to use it... for obvious reasons of not having your house (or family) smooshed, but also because if an Earthquake hits that levels houses all over the bay area, every insurance company that gave out that insurance would declare bankruptcy the next day.
 
I did the analysis and figured it was not worth the money. You get a high payment and crazy high deductible. Remember in many cases the value is in the land not the dwelling. Also the insurance company will look at any way to screw you if they can. Finally, the replacement of you house today would probably double or triple if it was done after a catestrophic event just because of the timing.
 
Had it for a little a while back. What was even remotely affordable would only cover like 50% of the rebuilding costs and it just didn't make much sense to keep it.
 
I did the first year I owned my house... But since then, I decided it wasn't worth it... The house is 12 years old, I owe more on it than its worth, and if it crumbles to the ground, I'll take that as a sign to file bankruptcy and move somewhere else.
 
Well, I was always resisting it as well, but an accountant asked me "Well where is all your money?" and I said that it's tied into the house, so he asked "So why wouldn't you protect it?". The high premium and deductible made me hesistate (for 5 years!) But then I added a bathroom and thought, holy crap that was expensive, how much would it cost to rebuild the whole friggen house? More than the deductible. But then how much damage does a quake do? Especially if I properly retrofit it? Cracks here and there, etc? This coverage includes up to $20k of "code upgrades" meaning that if they have to rebuild a room, they would update it to code (which I thought they'd have to do anyway).

Mike, so yeah, would insurance companies immediately declare bankruptcy? What happened during Katrina? But wouldn't they have re-insurance (with some too-big-to-fail AIG-like company?) And sure, if THEY can declare bankruptcy in an earthquake, why can't I and just walk away from the rubble and mortgage?

I've heard advice from both sides. Previous to Loma Prieta, I heard that it was much cheaper and the deductibles were much lower. Obviously when Loma Prieta DID strike, insurance companies changed their tune in a hurry.

My neighbour also pointed out the fact that post-disaster, contractors will triple their rates. so any amount of insurance you have is actually worth 1/3rd of what you think it should be.

I dunno. This is sort of why I polled the forum as well. I want to see who does and doesn't have it, and if it's "worth it" or not. I mean, I do NOT live in a castle, but I do have a big mortgage and I'd be screwed if I had to pay that and the full rebuilding costs!

V
 
This coverage includes up to $20k of "code upgrades" meaning that if they have to rebuild a room, they would update it to code (which I thought they'd have to do anyway).
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OUCH! If you have an old home this might be an issue... hell all the electrical alone would cost a few thousand easy... although I can't imagine how they could pay to have knob and tube wiring reinstalled. Seems silly. Definitely need to read the fine print though, it'd suck to see it covered rebuilding the structure, but not the roof or something equally silly however... not impossible.

Mike, so yeah, would insurance companies immediately declare bankruptcy? What happened during Katrina? But wouldn't they have re-insurance (with some too-big-to-fail AIG-like company?) And sure, if THEY can declare bankruptcy in an earthquake, why can't I and just walk away from the rubble and mortgage?
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Well whether or not they do or not depends how much they have to pay out, it wouldn't be immediately like I said though. I was kind of thinking if your house gets crumbled, chances are most of the other house in the entire region would also get crumbled, and it really would depend upon how many other houses they have to repair/rebuild. This all of course is worst case scenario. Hell only one company (20th Century) buckled after the Northridge earthquake, but I think everyone eventually got paid off. Again this is all worst case scenario type stuff, however you needing to sustain significantly more than $43k of damage (remember if you get 45k of damage, they only pay you 2k, and you were paying all these years into it...) may be worst case scenario stuff.

Either way, I don't have insurance because if my house does fall down, or sustain catastrophic damage, I'd be more than willing to go into older times where family members/friends would all build a barn and lend their expertise. Hell building a house from scratch does have advantages, for instance rewiring is easy if there's no walls in the way! :D
 
If there is an earthquake and the damage comes to exactly 45k, I'm gonna take a sledgehammer to the house at night and make sure I get my money's worth!

But yeah, about the coverage, I gotta look it over. What if a toilet breaks? It's not structural, right? I gotta pay for that? What about if the floor is wrecked, are they gonna pay to reinstall the hardwood floor? I mean, you can't just rebuild the structural parts. Do I have to pay for paint?

It's a racket, I know, but 15% is less than 100%.

V
 
Simple thing was the policy wouldn't reasonably cover rebuilding costs. They were offering about 50% of the current rate to build. Simple fact is their numbers were too low. To me - if I have to pony up $300K to complete the build I'm walking.
 
thats what my plumber said when my insurance company made me put on that earthquake shut off for the gas main... he simply said, if your house gets destroyed in an earthquake break it before the device so there's a fire that burns everything :d
 
"I just converted the tank into a outdoor sunlit tank to save on electricity... and damned if I didn't finish all the wiring then the earthquake... and fire hit"
 
Almost all earthquake ins today is done through the California earthquake authority. Almost all of Ca pays into it so if we get a big one up here well be fine as long as LA doesn't get one as well. It will replace the home up to your coverage limit minus your deductible which is usually 10-15% replacement costs. Contrary to popular belief insurance does not cover the land your house is on, they can care less about that so all the homes in Pacifica that lose land are screwed. if you have a 600k home in the bay area, it would realistically cost much less to rebuild the house as they are doing nothing to the land. All insurance companies have some crazy computer algorithm or something on how to figure out replacement cost that I never could understand, but if you absolutely wanted more coverage for ease of mind you could always ask for a higher limit. Of course then you would be paying more premiums and a higher deductible and run the risk of being over insured. With all that being said, when I worked in insurance most people 2/3rds or so would opt out of Earthquake ins just because of the high deductible, and that's ok if you have the cash lying around to build a new house without insurance. If not, you might want to rethink it.
 
Personally, I think the high deductible is great, because it makes it possible to afford.
The odds of an earthquake totally destroying your house is fairly low.
So the math on risk/payout is ok, and premiums for that are not horribly unreasonable.
The odds of an earthquake eventually doing some damage to your house is near 100%.
Really. It is. It will eventually happen.
So insuring that first $40K or so would be very expensive.

The land will most likely be fine, except rare places where it becomes permanently uninhabitable,
so most don't really need to insure that.

I do have earthquake insurance.
While the deductible is very painful, rebuilding, particularly when everyone else is,
would be a major problem.
 
LordHelmet said:
Of course then you would be paying more premiums and a higher deductible and run the risk of being over insured. With all that being said, when I worked in insurance most people 2/3rds or so would opt out of Earthquake ins just because of the high deductible, and that's ok if you have the cash lying around to build a new house without insurance. If not, you might want to rethink it.
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The point is earthquake insurance (whether or not you bump up your coverage), will likely not cover the replacement cost of your house. Replacement costs set by the insurance companies are un-realistic considering the timing of the replacement (materials and labor drastically inflated due to timing and circumstances and code updates). It also doesn't cover the loss in value to your land if there is a big quake (that is the depreciation on the land because everyone is in a panic and don't want to pay the "value for it) as you mentioned it totally takes the land value out of the insurance. So lets say you own a million dollar house (by todays value) if say $600 K is in the land then you are looking at perhaps covering $400K "replacement" having to come up with a crazy deductible and probably having to still come out of pocket more then any normal person has available (good luck trying to finance any of the rebuild costs).

Lastly, how much equity do you think the average Bay area resident has in their house? guarantee nearly all have less equity then the cost of the deductible they would have to pay. to me this is the big x factor. If you have a ton of equity in your house (and who knows how much that would decrease because of a decrease due to the disaster itself regardless of whether your house is catasthrophically damaged) it MAY make sense to carry earthquake insurance. If not you are essentially insuring a property for the bank.
 
Good point.

seminolecpa said:
Lastly, how much equity do you think the average Bay area resident has in their house? guarantee nearly all have less equity then the cost of the deductible they would have to pay. to me this is the big x factor. If you have a ton of equity in your house (and who knows how much that would decrease because of a decrease due to the disaster itself regardless of whether your house is catasthrophically damaged) it MAY make sense to carry earthquake insurance. If not you are essentially insuring a property for the bank.
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In my case, the insured value is $298k with $43k deductible and about $900 premiums. The market value of the house is (maybe) more than double the insured value ... because of the land value. I'm paying the extra $50/year to cover $20k of "code upgrade" (I'm still not completely sure of what that means, is that $20k above the $298k, but only useable on upgrading code?) I got the code upgrade for obvious reasons ... my house was built to 1939 building codes. My house is small so would $298k cover it? Well I added a bathroom and it cost be $50k (tacked a room to the side of the house that required framing up from the "ground floor", stupid hillside house!) So ... holy crap how much does it cost to build a whole house? On the other hand, way back when my family built a 2 story cottage, it cost $30k (I think) for the framed shell of the cottage, and took one or two guys a WEEKEND to build. But that was in the boonies of Canada.

My equity in the house is a bit more than $200k so it would be hard to stomach just walking away from it. And I would have a hard time paying rebuilding costs AND the mortgage.

The "housing' allowance on the policy is pitiful as well. $1500. Yes...$1500 to house your family ... where? In a land full of displaced people? Well, it could almost cover plane tickets to Toronto so we could stay with my parents. If I want to toss yet more money at the premiums, then I could get like $25,000 for housing, which would be a heck of a lot more useful considering how long it would take to rebuild a house.

My mother-in-law had a fire in her house (caused by a tenant starting a pot of soup and then leaving the house). Luckily neighbours saw the smoke and called 911, but the house was highly damaged. It took OVER A YEAR to fix the house, of course this was during the housing boom, so the contractors were only over there whenever they felt like it. My dumb mother-in-law was put up in an apartment, but she decided to go to Singapore and then live with a friend when she got back...so the insurance company felt no need to lean on the contractors, since she wasn't costing them anything to house her during repairs. Luckily, she then sold the house at the near peak of the housing boom.

So it if takes a friggen year to get your house back, $1500 ain't gonna cut it. But dammit, I don't want to jack the premiums.

V
 
Jon probably could chime in here... but it's easier (and cheaper) to build from scratch, than to have to retrofit an existing space and tie into existing structure,electrical,plumbing, etc. So I wouldn't let that bathroom re-do scare you too much... although 50k is a lot of money, hopefully you have a spectacular bathroom. How much to build a whole house? I couldn't honestly tell you. In a normal world, a quarter million should cover it as long as you don't get a contractor trying to squeeze you dry, which as mentioned a few times probably would happen if they have a lot of work available. This is where it helps to have friends, family, etc who are knowledgeable in these areas, not that they'd work for free, but they probably would be less likely to ream you.

Housing, yeah $1500 better be amount they're throwing in for free, you can take a trip somewhere to live, or buy a really good tent for the backyard :D I'd move in with my parents, but they're just a stones throw down peninsula, and might be in the same issue as me. It really would be time to consider that part of the deductible. Maybe send your family someplace nicer (parents) and stay at a sleezy apartment while you continue to work... *shrug*...

Hell all my equity is this house, this is my retirement, so its all on me if it comes down. I won't deny that its scary, especially considering where I live and a house right next to mine, and another next to that, but on the downhill side no house, I very easily could be pushed over by the other two houses :D But like I said, a good tent, hopefully the solar panels are still working, and I can do some serious long term camping in the worst case :D
 
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