Your Position on Earthquake Insurance
Less than 1 in 5 California homeowners have purchased earthquake insurance; this means that more than 4 out of 5 California homeowners either feel that they can’t afford it or simply taking the chance that they will not be the victim of the next temblor.
Many homeowners who have at least entertained the idea and perhaps even requested a quotation may have been turned off due to the high premium of earthquake insurance, perhaps the high deductible and their present equity position in their home.
Earthquake insurance is designed to soften the fall after the devastation of a catastrophic earthquake; although there may not be a vast array of competition, we do have a few good options including much more customization than ever before.
It is true that the most common customers are those who have something to lose; recent financially astute clients have explained that 75% coverage to rebuild the home in the case of a devastating event would be all they need; perhaps leaving the other 25% to FEMA emergency funds (if available), Federal Disaster Loans (which must be paid back) and personal savings.
With the recent introduction of customizable earthquake insurance, homeowners can pick and choose their coverage, not being bound to buy the common package, plus with a larger than ever variety of deductible options to truly customize the risk based on the client’s perception.
The infamous Northridge Earthquake of 1994 caused underwriting carriers to pull from the earthquake insurance marketplace; thus pressuring the State legislature to respond by forming the CEA (California Earthquake Authority) which is simply a pool of insurance carriers sharing in the risk in proportion to their percentage of homes covered in the state.
In addition to the CEA, we now have 4 or 5 additional choices which may be well worth looking into; it is worth talking to a professional with experience during the past 23 years to explain the options and differences in available policy contracts.
The most important issue to understand is that the carrier is providing the insurance but the homeowner should be able to buy coverage for what he/she perceives to be their personal risk. For most people, the most important item would be the reconstruction of the home (Dwelling) and the second most important coverage item would be Loss of Use (to provide reimbursement of rental expenses for a place to live during the reconstruction or repair of the insured home).
For most Americans, our homes represent our largest asset. Perhaps you’d think that this would warrant taking a second look at securing our financial position with the assurance of earthquake insurance.
Insurance carriers have heavily researched areas of more concern or likeliness of a devastating event. Many clients have been advised to request an earthquake insurance quotation for a specific home before buying a house; the premium would be indicative of the risk. Thus, a homeowner would be better of insuring homes with higher premium than homes in an area where much lower premium is charged.
After a huge earthquake, we will all lose something; perhaps the few lucky ones who have insurance may lose much less making the investment in an earthquake insurance policy worth the gamble.