I’m a homeowner living in the San Francisco Bay area, and I do not have Earthquake insurance. The reason is it’s absolutely way to expensive, and the deductible for my house is around 60k. Even if we have an Earthquake, the cost of the damage may not even be covered by Earthquake insurance. Why should I pay for coverage that may or may not help me in the event of an Earthquake? Many homeowners have the same views as I do. A possible Earthquake within the next 30 years is not enough to justify having an insurance policy that may not even cover your damage in the event of an Earthquake. The Industry should find a way to make Earthquake policy more affordable.
Fanucci.. While I understand the position you are using, it is the same aruguement that most people have about not insuring a home in general. Why pay for home insurance since I haven’t had a fire, theft, etc? Just a waste of my hard earned money for what? Peace of mind. This is a great example of law of large numbers. If more people cared about properly insuring their earthquake risk then the premiums and deductibles should be driven down. By maintaining the attitude that you and countless others have about EQ coverage the premiums will continue to remain high. Just another person hoping for the government to bail them out if and when the time comes.
I have homeowners insurance for my house. I’m insured for full replacement incase of fire, and I have an alarm for my house. EQ coverage is expensive. I felt the Napa EQ, but nothing in my house move. I did not have any damage to the house, or my pool.
I have lived in California all my life, and as homeowners this is a huge decision that we have to weigh when getting coverage for our houses.
Fanucci, purchasing insurance is just one risk management tool to use. Self-insuring is another. You made a choice for your own reasons and it is expensive until your house is shaken to the ground. That seems to me to be an even bigger “deductible”.
Fanucci, has your house ever been threatened by wild fires that seem to happen every year in California? How about mud slides? California seems to have a lot of bad exposures and earthquakes are only part of it.
At least CA isn’t $500M+ behind in keeping up their infrastructure. Imagine how much more devastating those CATS could be if they had infrastructure like TX. YIKES!
October 13, 2014 at 2:10 pm
Quaking in my boots says:
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There is a way to make the insurance more affordable. Unfortunately, you have to move to get that benefit. The risk is the same as building a house where it floods readily. It is unaffordable to insure. The government cannot subsidize it. We should not subsidize flood coverage either.
People generally do not buy EQ insurance because it is expensive and is not usually required by the lenders. It is expensive because there is a real chance of serious loss. In California where taxes are very high and descretionary income at a premium, people feel they cannot afford it. There is where the socialist government model breaks down. It severely restricts and limits the individual to provide solutions for themselves. Hence when this megaquake hits and the damage is huge, people will walk away if there is no equity. The solution is for lenders to mandate EQ coverage in an EQ zone, just like flood. If the homebuyers don’t want to pay for coverage they cannot borrow the money. If they pay cash they incur the risk unless they offset with insurance.
I agree. EQ insurance is not mandatory. The only solution is the lender to make EQ coverage mandatory, since California is EQ country. With EQ insurance only being offered homeownership would definitely change.
Perhaps you should be putting pressure on Brown to offer affordable EQ Insurance through the State if companies will not underwrite it or the offerings are high premiums. I am sure he has enough discretionary income to create a fund, right? I don’t envy people living in fault zones, but they did choose to live there and assumption of risk does come into play.
The problem is that many homeowners don’t have enough equity to cover the 15% deductible. There are 8 EQ zones with zones A and B (SF Bay area and LA area)the highest hazard, so it’s a “walk-away” situation for most of us in those zones. Homeowners in less hazardous areas have no incentive to buy, either. “Best case” for coverage in a large EQ loss is fire-following.
Commercial lenders usually require EQ insurance in zones A and B.
What’s socialist about EQ insurance? It’s free market capitalism at it’s finest. The carrier will provide the coverage for a premium they determine is fair. You can either buy it not.
Libby – There is nothing socialist about any insurance coverage, but you have to have the funds in your account to transfer risk. Socialist economies require much more of your money, which means you have less of it to purchase what protects you, your family and your investments such as your house in the event of a quake. That is why so many socialist economies fail, is the because the individual has less.
Lou, the Socialist government of California consistently runs huge deficits in their budget despite having an onerous 13.3% Income Tax rate which depresses the disposable income of their citizens. They also want all the illegal aliens to come and live there and that stresses their budget tremendously. How many cities out there have declared bankruptcy because of the generous pension benefits of their public servants? I saw a story a while back that some lady supervisor retired on $400,000 per year on her pension. Please someone tell me how that is affordable to a city.
Fanucci, I sympathize with you. Pricing on average is higher in your area. The three main components to earthquake rate is age of the home, insured value, and location (proximity to EQ faults & soil type). The bay area in general is a tough spot for all EQ insurers. There are a number of major fault lines running in & out of the area, there are lots of places with adverse soil types (sand/silt/fill) which is subject to liquefaction, and there are a lot of older neighborhoods (which you might be living in?). If you have an older home (pre 1955), I’d suggest making sure it’s properly retrofitted for earthquakes. After that, I’d at least have the peace of mind that the structure meets more up to date engineering standards.
Companyman & Lou both hit the nail on the head. It’s not just homeowners who choose not to buy EQ insurance that will be hoping for a bailout… Think of all the lenders out there that would experience a mass exodus of non EQ insured borrowers walking away from properties that are deemed uninhabitable after the next “Big One”. If a house has to be demolished & rebuilt, all the equity in the home is gone and what is left to keep the borrower there? I only know of one lender that currently requires EQ insurance on their mortgages for homes located in areas known to be active for earthquakes. Logically you’d think it should be more like flood insurance. If you were lending money to someone to buy a home in the bay area and the home was the collateral, wouldn’t you want that dwelling to be insured for the risk of EQ? I would! I think the banks will be looking for another bailout after the next “Big One”. They’ll likely get it too (individual tax payers wont). The sad thing is that not until a post massive-earthquake sort of big bank bailout will EQ insurance be a mortgage requirement for homes located in active EQ areas. And why don’t they mandate it now? Probably because it would need to be an industry wide change that way it wouldn’t make one lender less competitive than another. It might make someone on the edge of qualifying, unacceptable for a loan? Who knows all the reasons why, but just like trying to correct a teenager and show them the right way to do something, the banks will keep doing it the way they’re comfortable with until something goes horribly wrong. If & when it does happen, and when EQ insurance is finally a mandated part of a mortgage for a home in an EQ area, as Countryman says, the law of large #’s would eventually go into effect and premiums would go down for EQ insurance.
Libby, you’re right… if the state were to make EQ insurance mandatory, it would be fascist. Now if the state/fed were to influence the banks to make it mandatory on their mortgages in areas of higher EQ risk in order to avoid a potential big bank bailout… not that would just be responsible.
I’m a homeowner living in the San Francisco Bay area, and I do not have Earthquake insurance. The reason is it’s absolutely way to expensive, and the deductible for my house is around 60k. Even if we have an Earthquake, the cost of the damage may not even be covered by Earthquake insurance. Why should I pay for coverage that may or may not help me in the event of an Earthquake? Many homeowners have the same views as I do. A possible Earthquake within the next 30 years is not enough to justify having an insurance policy that may not even cover your damage in the event of an Earthquake. The Industry should find a way to make Earthquake policy more affordable.
Fanucci.. While I understand the position you are using, it is the same aruguement that most people have about not insuring a home in general. Why pay for home insurance since I haven’t had a fire, theft, etc? Just a waste of my hard earned money for what? Peace of mind. This is a great example of law of large numbers. If more people cared about properly insuring their earthquake risk then the premiums and deductibles should be driven down. By maintaining the attitude that you and countless others have about EQ coverage the premiums will continue to remain high. Just another person hoping for the government to bail them out if and when the time comes.
I have homeowners insurance for my house. I’m insured for full replacement incase of fire, and I have an alarm for my house. EQ coverage is expensive. I felt the Napa EQ, but nothing in my house move. I did not have any damage to the house, or my pool.
I have lived in California all my life, and as homeowners this is a huge decision that we have to weigh when getting coverage for our houses.
Fanucci, purchasing insurance is just one risk management tool to use. Self-insuring is another. You made a choice for your own reasons and it is expensive until your house is shaken to the ground. That seems to me to be an even bigger “deductible”.
Fanucci, has your house ever been threatened by wild fires that seem to happen every year in California? How about mud slides? California seems to have a lot of bad exposures and earthquakes are only part of it.
At least CA isn’t $500M+ behind in keeping up their infrastructure. Imagine how much more devastating those CATS could be if they had infrastructure like TX. YIKES!
There is a way to make the insurance more affordable. Unfortunately, you have to move to get that benefit. The risk is the same as building a house where it floods readily. It is unaffordable to insure. The government cannot subsidize it. We should not subsidize flood coverage either.
People generally do not buy EQ insurance because it is expensive and is not usually required by the lenders. It is expensive because there is a real chance of serious loss. In California where taxes are very high and descretionary income at a premium, people feel they cannot afford it. There is where the socialist government model breaks down. It severely restricts and limits the individual to provide solutions for themselves. Hence when this megaquake hits and the damage is huge, people will walk away if there is no equity. The solution is for lenders to mandate EQ coverage in an EQ zone, just like flood. If the homebuyers don’t want to pay for coverage they cannot borrow the money. If they pay cash they incur the risk unless they offset with insurance.
I agree. EQ insurance is not mandatory. The only solution is the lender to make EQ coverage mandatory, since California is EQ country. With EQ insurance only being offered homeownership would definitely change.
Perhaps you should be putting pressure on Brown to offer affordable EQ Insurance through the State if companies will not underwrite it or the offerings are high premiums. I am sure he has enough discretionary income to create a fund, right? I don’t envy people living in fault zones, but they did choose to live there and assumption of risk does come into play.
“…offer affordable EQ Insurance through the State…”
There is, sort of:
http://www.earthquakeauthority.com/index.aspx?id=1&pid=1
The problem is that many homeowners don’t have enough equity to cover the 15% deductible. There are 8 EQ zones with zones A and B (SF Bay area and LA area)the highest hazard, so it’s a “walk-away” situation for most of us in those zones. Homeowners in less hazardous areas have no incentive to buy, either. “Best case” for coverage in a large EQ loss is fire-following.
Commercial lenders usually require EQ insurance in zones A and B.
What’s socialist about EQ insurance? It’s free market capitalism at it’s finest. The carrier will provide the coverage for a premium they determine is fair. You can either buy it not.
Making EQ coverage mandatory would be fascist.
Libby – There is nothing socialist about any insurance coverage, but you have to have the funds in your account to transfer risk. Socialist economies require much more of your money, which means you have less of it to purchase what protects you, your family and your investments such as your house in the event of a quake. That is why so many socialist economies fail, is the because the individual has less.
Lou, the Socialist government of California consistently runs huge deficits in their budget despite having an onerous 13.3% Income Tax rate which depresses the disposable income of their citizens. They also want all the illegal aliens to come and live there and that stresses their budget tremendously. How many cities out there have declared bankruptcy because of the generous pension benefits of their public servants? I saw a story a while back that some lady supervisor retired on $400,000 per year on her pension. Please someone tell me how that is affordable to a city.
Fanucci, I sympathize with you. Pricing on average is higher in your area. The three main components to earthquake rate is age of the home, insured value, and location (proximity to EQ faults & soil type). The bay area in general is a tough spot for all EQ insurers. There are a number of major fault lines running in & out of the area, there are lots of places with adverse soil types (sand/silt/fill) which is subject to liquefaction, and there are a lot of older neighborhoods (which you might be living in?). If you have an older home (pre 1955), I’d suggest making sure it’s properly retrofitted for earthquakes. After that, I’d at least have the peace of mind that the structure meets more up to date engineering standards.
Companyman & Lou both hit the nail on the head. It’s not just homeowners who choose not to buy EQ insurance that will be hoping for a bailout… Think of all the lenders out there that would experience a mass exodus of non EQ insured borrowers walking away from properties that are deemed uninhabitable after the next “Big One”. If a house has to be demolished & rebuilt, all the equity in the home is gone and what is left to keep the borrower there? I only know of one lender that currently requires EQ insurance on their mortgages for homes located in areas known to be active for earthquakes. Logically you’d think it should be more like flood insurance. If you were lending money to someone to buy a home in the bay area and the home was the collateral, wouldn’t you want that dwelling to be insured for the risk of EQ? I would! I think the banks will be looking for another bailout after the next “Big One”. They’ll likely get it too (individual tax payers wont). The sad thing is that not until a post massive-earthquake sort of big bank bailout will EQ insurance be a mortgage requirement for homes located in active EQ areas. And why don’t they mandate it now? Probably because it would need to be an industry wide change that way it wouldn’t make one lender less competitive than another. It might make someone on the edge of qualifying, unacceptable for a loan? Who knows all the reasons why, but just like trying to correct a teenager and show them the right way to do something, the banks will keep doing it the way they’re comfortable with until something goes horribly wrong. If & when it does happen, and when EQ insurance is finally a mandated part of a mortgage for a home in an EQ area, as Countryman says, the law of large #’s would eventually go into effect and premiums would go down for EQ insurance.
Libby, you’re right… if the state were to make EQ insurance mandatory, it would be fascist. Now if the state/fed were to influence the banks to make it mandatory on their mortgages in areas of higher EQ risk in order to avoid a potential big bank bailout… not that would just be responsible.