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Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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letsgobobby
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ddunca1944
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Re: Got earthquake insurance?

Post by ddunca1944 »

Yep. We've got it (also live in the PNW) It's a separate policy that is about 25% the Homeowner's. Our deductible is 20%.
hicabob
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Re: Got earthquake insurance?

Post by hicabob »

In the Loma Prieta quake , whose actual epicenter was about 6 miles from my house at the time, my neighbors house got destroyed and had to be demolished. It was a geodesic dome that shifted about 2 feet off its foundation (which it was bolted to). My house only had a cracked window as damage. My neighbor didn't have insurance and she was not low income but she was able to get a super low interest rate FEMA loan to rebuild and county permit fees were greatly reduced. She ended up with a much nicer house after all was done. I expect these loans will be available after another significant quake which might be a consideration for some. Our shared 6000 gallon water tank also toppled but was replaced free with a much nicer tank under a govt program.
Personally, I self insure for that kind of thing.
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Watty
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Re: Got earthquake insurance?

Post by Watty »

I had it when I lived in the NW. I also have it now that I live in the South East.

http://earthquake.usgs.gov/hazards/prod ... t50yrs.pdf
RYD
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Re: Got earthquake insurance?

Post by RYD »

We live in Northern California and have it on our home as well rental property we own.
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letsgobobby
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Re: Got earthquake insurance?

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ABQ4804
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Re: Got earthquake insurance?

Post by ABQ4804 »

Yes, live in Portland, and have a separate policy from GeoTech, with 25% of appraised value as the deductible (I could choose the % deductible). Also about 1/3 the cost of separate homeowners policy. I wouldn't want to wait for FEMA.
jmg229
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Re: Got earthquake insurance?

Post by jmg229 »

In Utah we have it. It's about equal to the rest of our homeowner's insurance, but it is something I'd rather not self-insure for. We wouldn't be totally broke if we lost the house, but it'd be pretty devastating. To me, you self-insure when you can both financially and emotionally. We can do the former, but not the latter for earthquake damage.
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baw703916
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Re: Got earthquake insurance?

Post by baw703916 »

This is a timely topic, as I may be moving to that part of the country and this is something to think about.

I don't really know how the system works, as in who is providing the financial backing should say an 8.2 earthquake hit a major metro area? How sure is a holder of getting paid in a major event?
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dewey
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Re: Got earthquake insurance?

Post by dewey »

We live in Vancouver, WA and have earthquake insurance.
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nisiprius
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Re: Got earthquake insurance?

Post by nisiprius »

We live in the Northeast and we have earthquake insurance.
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mnaspbh
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Re: Got earthquake insurance?

Post by mnaspbh »

baw703916 wrote:This is a timely topic, as I may be moving to that part of the country and this is something to think about.

I don't really know how the system works, as in who is providing the financial backing should say an 8.2 earthquake hit a major metro area? How sure is a holder of getting paid in a major event?
In my opionion, unlikely, at least unlikely to be paid in any reasonably timely fashion. A really big earthquake could easily cause enough damage to wipe out the insurers (tens to hundreds of billions of dollars). They'll fold or try to weasel out of paying, the government may or may not try to bail them out, and the resulting court cases will probably drag on for many many years. Just see what happens after recent hurricanes, where the insurance companies go back and forth about what actually caused the damage, to try to pin it on something that's not covered.

Plus, the policies I've looked at (in the Pacific Northwest and California) had incredibly high deductibles and tons of exemptions. 20% deductible or more (easily 100-200K+ deductible!), no/little coverage for vehicles or electronics or household possessions in general, etc (varies by the policy, with some very expensive riders occasionally available), easily exceeding the cost of homeowner's insurance. Based on where we live, and local geological conditions, if an earthquake did enough damage to exceed the deductible there would almost certainly be such incredible devastation in the region so as to swamp the insurers.

We have insurance for lots of other things, but not earthquakes. If there's such a major earthquake in our lifetimes that wipes out the region, we'd probably just move and downsize in the process...along with the rest of the refugees that would be created.

Most earthquake-prone areas are very overdue for major quakes. Of course, many volcano-prone areas are also overdue for major eruptions. Got volcano insurance?
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nisiprius
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Re: Got earthquake insurance?

Post by nisiprius »

mnaspbh wrote:...A really big earthquake could easily cause enough damage to wipe out the insurers (tens to hundreds of billions of dollars). They'll fold or try to weasel out of paying, the government may or may not try to bail them out, and the resulting court cases will probably drag on for many many years. Just see what happens after recent hurricanes, where the insurance companies go back and forth about what actually caused the damage, to try to pin it on something that's not covered...
The reasoning that because insurance is bad, it must be worthless, puzzles me. If insurers fold, it can only be as a result of paying claims. That means that however bad it is for policyholders, they are better off than if they had not had insurance.

Googling about the 1906 San Francisco earthquake, it seems clear both that insurers weaseled and that they paid out a ton of claims. The issue there was that it was fire insurance with earthquake exclusions, so insurers naturally wanted to claim that damage was earthquake damage rather than fire damage. An "interesting" issue was that many houses were dynamited to create firebreaks! One account is here. It says that insurers paid for dynamited homes. It also says
Many insurers were paying out only 80 percent on claims on the grounds of not being able to determine the cause of losses.

Lloyd’s, however, stood fast. Thor Valdmanis, Lloyds America vice president communications, explained, “We had a leading Lloyd’s underwriter named Cuthbert Heath who cabled a San Francisco agent from London and said, ‘Pay all of our policy holders in full irrespective of the terms of their policies.’”
If I'd been insured and only got paid 80% I'd be ticked off, but I'd be a lot better off than if I hadn't had insurance.

One conclusion I draw from the fire-versus-earthquake and the hurricane wind-versus-water stuff is that one should try to cover as much as possible so that the insurer can't claim that the damage was caused by whatever you didn't insure against. Of course all the policies are so riddled with complicated exclusions that that's hard to do.
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baw703916
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Re: Got earthquake insurance?

Post by baw703916 »

So since one of the issues in a Cascadia earthquake would be a tsunami, would that be under flood insurance?
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john94549
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Re: Got earthquake insurance?

Post by john94549 »

We have it (Northern CA). The deductible is steep (15%), but we have a separate "earthquake" fund to cover, if need be, in an IRA CD with no EWP (as we are over 59 1/2). I suspect the greater problem after the next "big one" will be finding builders, at any price, able to tackle the work.
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Epsilon Delta
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Re: Got earthquake insurance?

Post by Epsilon Delta »

nisiprius wrote:The reasoning that because insurance is bad, it must be worthless, puzzles me. If insurers fold, it can only be as a result of paying claims. That means that however bad it is for policyholders, they are better off than if they had not had insurance.
Bad insurance is not worthless but it is worth less. Ceteris paribus there's some deductible, or some price, where the insurance offered is just not worth buying. If likely insolvency of the insurance company pushes the effective deductible to 40%-50% that might be enough. Particularly if the insurance is tied to rebuilding, instead of upping stakes and buying a nice $100,000 house in the mid-west.
nisiprius wrote:If I'd been insured and only got paid 80% I'd be ticked off, but I'd be a lot better off than if I hadn't had insurance.
But you can't buy insurance after the earthquake. You have to buy when an earthquake is still a contingency, and it makes sense to take all contingencies (including possible non-payment) into account.
nisiprius wrote:One conclusion I draw from the fire-versus-earthquake and the hurricane wind-versus-water stuff is that one should try to cover as much as possible so that the insurer can't claim that the damage was caused by whatever you didn't insure against. Of course all the policies are so riddled with complicated exclusions that that's hard to do.
There's always the nuclear option. All insurance excludes nuclear incidents. Plate tectonics is largely powered by nuclear decay. :o
john94549
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Re: Got earthquake insurance?

Post by john94549 »

Epsilon Delta wrote: Plate tectonics is largely powered by nuclear decay.
So I guess any earthquake is excluded "by definition". Well, that's comforting.
bnes
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Re: Got earthquake insurance?

Post by bnes »

Your best investment might be a pre-paid retainer with a contractor.
Insurance settlement or no, who's going to rebuild your house,
when every house in the area got hit?
freebeer
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Re: Got earthquake insurance?

Post by freebeer »

I am a 20 year Pac NW resident and have never had earthquake insurance at any of the 4 homes we've owned. But now I'm renting at a waterfront spot where an extension of the Seattle Fault (discovered, interestingly, via LIDAR mapping - http://geomaps.wr.usgs.gov/pacnw/graphic/toejamfM.jpg ) runs right through the property. If I owned this property I would certainly consider earthquake insurance even if more than 30% of homeowners policy... but then it might not be possible to get it. Then again it's low bank so there are other risk factors besides earthquake...
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GerryL
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Re: Got earthquake insurance?

Post by GerryL »

I bought earthquake insurance when I bought my PNW house in 1990, several years before the Spring Break Quake that got people thinking about the need for this kind of coverage. After the SBQ, premiums went up, but I kept coverage. This year I was shopping for new car insurance and switched to USAA. During my research I learned that I am grandfathered into my Farmer's earthquake insurance rider. If I were to change home owner insurance I would need to buy a separate earthquake policy -- at a higher premium that would more than wipe out any savings I got from switching auto policies.
mnaspbh
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Re: Got earthquake insurance?

Post by mnaspbh »

nisiprius wrote:
mnaspbh wrote:...A really big earthquake could easily cause enough damage to wipe out the insurers (tens to hundreds of billions of dollars). They'll fold or try to weasel out of paying, the government may or may not try to bail them out, and the resulting court cases will probably drag on for many many years. Just see what happens after recent hurricanes, where the insurance companies go back and forth about what actually caused the damage, to try to pin it on something that's not covered...
The reasoning that because insurance is bad, it must be worthless, puzzles me. If insurers fold, it can only be as a result of paying claims. That means that however bad it is for policyholders, they are better off than if they had not had insurance.
Policyholders wouldn't necessarily be better off--if the premiums paid are sufficiently higher than any payout is likely to be, it may be enough of a net loss to not be worth it. There's a price point for any insurance where it's just not worth carrying, and for us, that includes earthquake insurance with the policies and prices I last saw. If the premiums were lower, or the coverage better, it would be worth buying. But looking at some of the reported claim/payout numbers from past earthquakes, average payouts were on the order of just a few years of premiums (e.g., $8700 in 2014 dollars in average payouts from the Loma Prieta quake, based on payout data from an LA Times article and www.usinflationcalculator.com/).
nisiprius wrote:One conclusion I draw from the fire-versus-earthquake and the hurricane wind-versus-water stuff is that one should try to cover as much as possible so that the insurer can't claim that the damage was caused by whatever you didn't insure against. Of course all the policies are so riddled with complicated exclusions that that's hard to do.
It's hard to do, and may be too costly. You can almost certainly add enough riders to an insurance policy to raise the premiums to the point where you say that it's not worth it, based on your personal risk/cost benefit analysis (i.e., the magnitude of the negative expected benefit is too large). If you disagree, try going to your favorite insurance agent and tell them you want to spend as much on premiums and riders as possible, and see where that gets you. :)
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letsgobobby
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Re: Got earthquake insurance?

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skylar
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Re: Got earthquake insurance?

Post by skylar »

As a renter in the PNW, earthquake insurance is super cheap since I don't need to cover any structural damage. For ~$25 extra dollars per year, I get covered for damage to possessions and also alternate living arrangements in the event of an earthquake. I hope I never need it, but the cost/value ratio is definitely right.
PatrickA5
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Re: Got earthquake insurance?

Post by PatrickA5 »

People have started buying earthquake insurance here in Oklahoma. You'd think the land of tornados wouldn't have to worry about earthquakes, but they're happening a lot here now (1,350 quakes in the last year, ranked 2nd to California in 2013). Most are small, but a few get up there around 5.0. I don't plan on buying any insurance, but might down the road if things get worse. Right now, it's pretty cheap, but the deductibles are kind of high.
Ninegrams
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Re: Got earthquake insurance?

Post by Ninegrams »

We live within an hours drive of Portland ( OR) and added an earthquake rider last year. I was pleasantly surprised at how inexpensive it was ( a little over 20% of the HO premium ) for a 10K deductable. I needed to verify the house was bolted to the foundation, and fortunately it was. The megathrust quake will likely be devastating when it finally does break loose.
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Re: Got earthquake insurance?

Post by Sheepdog »

I have earthquake insurance in Indiana. I am on the Wabash Fault which is connected to the New Madrid fault line. The zone had four of the largest North American earthquakes in recorded history, with moment magnitudes estimated to be as large as 8.0, all occurring within a three-month period between December 1811 and February 1812.
Interestingly, the insurance does not cover my home's brick veneer.
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desiderium
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Re: Got earthquake insurance?

Post by desiderium »

My earthquake insurance in the Pacific Northwest is about 1.5x my homowners. I have Geovera. Where are the policies that are relatively inexpensive?
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Re: Got earthquake insurance?

Post by ralph124cf »

When I lived in California, I had earthquake insurance. The price and deductible has gone up radically since I lived there. If I lived there now, I would buy a house for 10% down, and not buy earthquake insurance (which is not required by lenders) and let the lender accept the earthquake risk since the deductible exceeds the 10% ownership share.

My wife and I were lying in bed during the Northridge earthquake in 1994, and when it woke us up we were gazing at the stars during our partially done remodeling experience. I remember thinking: Damn, if I had waited six months to start this, my insurance company would have paid for it.

I now live in Illinois, and I carry earthquake insurance, but it is incredibly cheap compared to California, due to far less risk.

Ralph
PugetSoundguy
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Re: Got earthquake insurance?

Post by PugetSoundguy »

We live in the Pacific NW and have earthquake insurance as part of our homeowner's policy through a national insurer. Yes, it's expensive and there's a massive deductible, but we can't self-insure on this one. I've always been amazed that fire but not earthquake insurance is required for a mortgage. When the Big One hits here it obviously will be very difficult to find a builder to make repairs. That is why a huge benefit of our policy is that it will cover comparable substitute living quarters (with no deductible) until repairs are complete. I think after the Big One that benefit alone could be worth upwards of $50,000. Of course, I would be happiest if we pay all these premiums and never submit a claim, but I've got a bad feeling about this.... :|
DFrank
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Re: Got earthquake insurance?

Post by DFrank »

We have earthquake insurance on our home in SoCal. Yes, the deductible is high, but I look at it as insuring for the worst case event of our house being totaled. It won't cover a lot of broken glass, etc., but we can self insure for that level of damage.
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Re: Got earthquake insurance?

Post by shelanman »

I looked at carrying earthquake insurance on my place, but now that (by law) there is only one insurer (the state, itself), prices are super high and coverage is super poor.

I was looking at paying 2.5% of the value of my property every year for coverage with a 50% deductible, with a whole host of stuff excluded entirely. The coverage includes an escape clause for the state (if they receive in claims "more than they anticipated" then they reserve the right to pay less that the limit of liability, shorting people however they choose -- which will inevitably mean that low-income insured are made whole at the expense of higher-income insured).

Forget that!

So, my mortgage is my earthquake insurance, and the unreasonableness of earthquake insurance is my primary motivation to not pay ahead on the mortgage.
Mudpuppy
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Re: Got earthquake insurance?

Post by Mudpuppy »

I have earthquake insurance. In my part of California, the earthquake insurance is pretty cheap. Might not be a huge "return", so to speak, but neither is it a huge cost.
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Re: Got earthquake insurance?

Post by dumbbunny »

GerryL wrote:I bought earthquake insurance when I bought my PNW house in 1990, several years before the Spring Break Quake that got people thinking about the need for this kind of coverage. After the SBQ, premiums went up, but I kept coverage.
I kept earthquake insurance on my home for a few years after Spring Break Quake and then dropped it after I found out my agent didn't earthquake insurance on his own house.
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Ninegrams
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Re: Got earthquake insurance?

Post by Ninegrams »

Peterjens wrote:
GerryL wrote:I bought earthquake insurance when I bought my PNW house in 1990, several years before the Spring Break Quake that got people thinking about the need for this kind of coverage. After the SBQ, premiums went up, but I kept coverage.
I kept earthquake insurance on my home for a few years after Spring Break Quake and then dropped it after I found out my agent didn't earthquake insurance on his own house.
Does your agent moonlight as a seismologist? Seriously though, why would you drop it just because your agent doesn't have it, assuming you know his rational for his decision? If you live in the PNW, then your in Cascadia Fault country ( potential magnitude 9.x quake ), and it's just a matter of when not if based on historical records.
OSUmountaineer
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Re: Got earthquake insurance?

Post by OSUmountaineer »

Does your agent moonlight as a seismologist? Seriously though, why would you drop it just because your agent doesn't have it, assuming y]ou know his rational for his decision? If you live in the PNW, then your in Cascadia Fault country ( potential magnitude 9.x quake ), and it's just a matter of when not if based on historical records.
The recurrence interval on the northern Cascadia fault zone is ~300 years, and the last subduction zone quake occurred in 1700. As a geologist in Seattle, I am anxious for the rupture and just hope my loved ones aren't in the wrong place at the wrong time! Man the Earth is cool....

Having lived in the Bay Area for a while, it's amazing the difference in public perception and attitude towards earthquakes when compared to the PNW. They happen all the time there, so people are generally prepared. It's part of daily life. Eventually a big one will hit again, but municipalities know that and prepare accordingly. In Seattle it seems to be an afterthought, even though there are priominent volcanoes to remind everyone of the dynamic place in which we live. When, not if...
Ninegrams
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Re: Got earthquake insurance?

Post by Ninegrams »

OSUmountaineer wrote:
Does your agent moonlight as a seismologist? Seriously though, why would you drop it just because your agent doesn't have it, assuming y]ou know his rational for his decision? If you live in the PNW, then your in Cascadia Fault country ( potential magnitude 9.x quake ), and it's just a matter of when not if based on historical records.
The recurrence interval on the northern Cascadia fault zone is ~300 years, and the last subduction zone quake occurred in 1700. As a geologist in Seattle, I am anxious for the rupture and just hope my loved ones aren't in the wrong place at the wrong time! Man the Earth is cool....

Having lived in the Bay Area for a while, it's amazing the difference in public perception and attitude towards earthquakes when compared to the PNW. They happen all the time there, so people are generally prepared. It's part of daily life. Eventually a big one will hit again, but municipalities know that and prepare accordingly. In Seattle it seems to be an afterthought, even though there are priominent volcanoes to remind everyone of the dynamic place in which we live. When, not if...
I'll leave the "cool" part to you and I sincerely hope I'm not around when the rupture ( rapture to some :twisted: ), but I agree it's a different mindset up here compared to the BA, most people if they even are aware of the fault zone are in some kind of denial. Even if one survives, the infrastructure may be so badly damaged for so long, that one will have no choice but to relocate to a different part of the state/country.
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