California earthquake insurance?

[Frank J Warner]

I live in California. I've had earthquake insurance on my house since the day I bought it in 1989.

My policy renews every year in June. This year, I received notice that earthquake coverage would no longer be offered by my primary carrier. Until now, the premium for that coverage was $250. $1000 deductible, full replacement cost plus contents, liability and medical, and we've kept the amounts current to the replacement value of the property.

Instead, my carrier said, I can buy separate earthquake insurance from an outfit called CEA, or California Earthquake Authority. From what I gather, CEA is a privately funded publicly managed organization that fulfills the mandate that insurers in California must offer earthquake insurance.

The premium jumps to a whopping $631.00, and the deductible jumps to a whopping $57,000 for a $380,000 home.

From what I've read, the premium and the deductible is so high because CEA is required by law to have sufficient funds to cover losses in a "500-year event." They have about $4 billion in reserve, which is not enough, so they spend 40% of that on supplemental insurance in case of such an event.

I don't live in LA or San Francisco. There are no major fault lines near my home, although there are lots of little ones. I've lived in this town since 1951 and the biggest earthquake I've experienced was about a 5.3, fifty miles away. Strong enough to knock some dishes off their shelves but that's about it.

I don't think this is a good deal. If there's an earthquake strong enough to cause $50,000 worth of damage to my home, I'd be better off getting a loan to cover it. Anything over that, I'd torch the place and move on.

What do you think?

Frank

[Peter]

You know best your total financial posture. Insurance is intended to pay for losses that you choose not to pay for yourself or cannot realistically afford. If you believe that your are in good enough financial shape to absorb the cost of potentially high-value damage to your home and contents, don't buy insurance. One caveat: If you have a mortgage, make sure that your mortgage holder does not require you to carry earthquake insurance.

[Frank J Warner]

Yeah. I should probably check that caveat. Thanks for one more thing to worry about :/

Frank

[ktos]

Frank J Warner wrote in news:260520120729439665% [e-mail]:

Those companies are crazy to offer earthquake insurance at all.

[Kurt Ullman]

Talk to some people in the Fl Keys if you want to know the next steps in state-run calamity insurance. IT isn't pretty what is happening down there on wind-hurricane insurance.

[Ed Pawlowski]

Put the money in the bank and in 500 years, you'll have saved enough to cover the event.

I'd move to Nevada. Or Nebraska.

[Frank J Warner]

Yes. Well. I plan to live forever, so I put $1 in a CD deposit yielding

1.25%. When forever comes I'll own everything.

Frank

[Frank J Warner]

That's not a bad idea. MIL lives in Florida (for which I'm grateful, living here in California). I'll have SWMBO call her and ask what she's doing about hurricane insurance.

Frank

[Caesar Romano]

On Sat, 26 May 2012 07:29:43 -0700, Frank J Warner wrote Re California earthquake insurance?:

Looks like a risky strategy to me.

[Ed Pawlowski]

The premiums should be astronomical and attune to the risk. The funds that pay for hurricane damage should mostly come from people that insist on building in some of those places. You want beach front? Fine, but don't bitch to me when it floods.

At least building codes are getting them to build houses that can take some of the beating.

[Vic Smith]

Why is that? It's a lot of premium money. If an insurance company goes bankrupt, the operators can just move on to start another insurance company, or go to work for one that didn't go bankrupt. Maybe the taxpayer bails them out, like with AIG. Insurance companies aren't dopes. They have the odds figured out pretty well.

[Vic Smith]

On the other side of the risk equation, I live in northern Illinois, and have earthquake insurance. Might be useless, but it's dirt cheap. There was a little tremor up here about the time I was renewing my homeowners a few years ago. So out of curiosity I asked my agent how much earthquake coverage cost. He was stumped, because nobody ever asks. Said he'd get back to me, and did the next day. $40 bucks. So I told my wife when she asked who was on the phone. Then when renewal got close, I had to think about that, and decide if I wanted earthquake insurance. I knew my wife knew what it cost. Since there's that big New Madrid fault down in Missouri, which can reach up here, and some others, and nobody can predict them, I imagined an earthquake. We escaped to the basement, and survived the house collapsing around us. We managed to crawl outside, nursed our cuts and scrapes, and felt lucky to have no broken bones, except my left arm and her right leg and collarbone. As we looked at our collapsed house, a total loss, my wife looked at me and asked, "Did you pay that 40 bucks for earthquake insurance?"

[George]

Actually they are being very smart. We live a few miles away from a flood plane. After numerous floods the insurance companies paid off the right politicians to have the start the Federal flood insurance. That way they could keep their much more lucrative and predicable core property insurance business.

[George]

For sure. I was watching a show one day and they were interviewing someone whose home on "breezy point" got trashed in a hurricane. The owner cheerfully noted that "the insurance" has already rebuilt the house twice so things really work out OK and they have that great view. You want a great view and build your house on breezy point don't complain when they actually increase the insurance premium to cover the risk.

[Vic Smith]

It's even better than that for the insurance companies. Private insurance companies get a cut of federal flood insurance premiums. My son just bought a house on a so-called "100 year flood plain." His neighbor's been there 40 years and says it never got close to flooding. Anyway, I can't argue about what's a flood plain. Mortgage lender requires flood insurance. $600 a year just for the flood insurance, on a house that cost $115k. That $600 is paid to State Farm, which gets a cut and profits by servicing the insurance. But they have absolutely no risk. FEMA has all the risk.

[tangerine3]

Sounds like it's time to find another insurance company.....

Then again, insurance is a paradise for crooks. Dont ever trust them....

On the same note, I would not live in California for any reason. Why live in a place prone to disaster? CA should have never allowed the building of permanent structures knowing how the earth is unstable. It should be limited to tents and teepees ONLY. Did you ever notice that huge body of water in mexico, where the land extends down from CA. That's the fault line. Some day that line will extend to Canada.

I dont know what they even call that part of the ocean, but it's obvious what occurred there and how that fault line is going north.

[Zz Yzx]

Tell me what town you're in and I'll offer advice.

-Zz, PG, CHG, BS, MS (geology)

[Frank J Warner]

No thanks. I don't need geologic advice.

Unless you know something every seismologist in the world hasn't managed to figure out yet.

Frank

[krw]

I don't even need to know which town he's in; move out of Kalifornica.

[Frank J Warner]

You're in the shadow of Mt. Rainier. You probably have volcano insurance, too.

Not a good time to be living in the Yellowstone area.

-Frank