A shocking statistic: 88 percent of California homeowners do not own earthquake insurance. This insurance has annual premiums ranging from $400 to $1,200 a year. It seems reckless for people to risk the destruction of their largest investments, their homes, just to save on insurance premiums.
Facing the Threat
The Mexican 7.4 magnitude temblor from a few years back reawakened the perennial debate in the Golden State on whether or not to buy earthquake insurance. Part of the problem is that insurance companies increase prices and deductibles in the last two decades following quakes in Northridge and Loma Prieta.
Californians know they live in earthquake country. Just about everyone is aware of the San Andreas Fault. Typical homeowners insurance does not cover earthquake damage unless you include a specific rider. And earthquake damage can be extremely expensive – the aggregate insurance payout following the Northridge quake is estimated as high as $29 billion. Deductibles went up to 15 percent at that time, though you can now find policies with a 10 percent deductible. While it’s true that an average homeowner in Orange County may have saved up to $17,000 over the last 20 years by foregoing quake insurance, the annual cost would have been reasonable and the insurance would have protected investments worth millions of dollars. Remember, without coverage, your deductible is 100 percent – you assume the entire loss.
Some homeowners rationalize their penny pinching by saying that the Federal government will bail them out if a quake hits. Don’t count on it – remember Katrina? Also, don’t forget you are still liable for your mortgage and tax payments even if your property is completely destroyed. It’s unlikely that the government is going to pay for those expenses. The irony is that you can get affordable insurance from the California Earthquake Authority as well as private insurance companies.
In addition to getting proper insurance, here are a few more tips for preparing for an earthquake:
- Identify Hazards: things like unsecured televisions, bookcases, computers, unstrapped water heaters, furniture, etc.
- Make an Emergency Plan: include evacuation and reunion plans, plus the names and contact information of out-of-state family or friends
- Stock Up: purchase emergency supplies and fire extinguishers, a week’s worth of food and water, first-aid kits, a battery-powered radio, flashlight with extra batteries, blankets, a barbeque or camping stove, and a wrench to shut off any gas lines you might have. You would do well to also stash some extra cash and prescriptions in a safe place.