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    • kevin

      I always thought EQ insurance was something California residents just didn’t buy due to absurdly high premiums and deductibles, but I’m now leaning towards purchasing it. Here’s why:

      The EQ section of the CA residential building code is primarily intended protect inhabitants from injury and death in the event of a large earthquake and NOT to preserve the structure itself. It’s very similar to a car. A car can be easily totaled in a major accident, even a minor one, but occupants can walk out alive. Sheer walls and foundations are like crumple zones in automobiles. Sheer walls can rack and foundations can break, rendering the structure uninhabitable. They only need to be safe enough for occupants to vacate immediately after a quake.

      On the West Coast, it’s not financially practical to build a home to survive a Magnitude 7+ quake in close proximity with current building practices. In fact, current residential building practices DO NOT have earthquake proof solutions. Commercial seismic solutions including things like suspensions and counter waits are not available for small homes. If you tried to implement something on a home yourself, the building inspector would red flag the structure. I’d bet these solutions, if legal on homes, would increase build cost by multiples.

      A new or retrofitted home is more likely to survive a quake but it is NOT guaranteed. Older homes not bolted to the foundations or those lacking sheer walls are at a higher risk of complete failure, but every home is at some non-negligible risk of complete failure in a major quake.

      Most of my San Jose, CA home’s structure is new from a remodel finished this year. It’s a seismically sound structure built better than 2018 building code requires. I got opinions from people if I should get earthquake insurance:

      - The building inspector that oversaw my remodel recommend I get EQ insurance immediately even though it’s one of the strongest structures he’s seen.
      - My parents, both residential architects, thought strongly that I should have it like they do on their house.
      - A friend getting his Geophysics PhD analyzed fault slip data near me, and thinks its worth it.

      Please convince me otherwise. EQ insurance is double my regular hazard insurance. For me it's a major financial decision that's tough to make. IMHO not having EQ insurance is a gamble, with far higher odds that my home will be completely destroyed than winning that lottery, normalized dollar for dollar.

      📸: Fabricating huge ridge beams used to transfer sheer from the roof down through the structure of my house.

    • I'll be waiting to hear the results.

      For me, the question is whether you can afford to rebuild. If so, great. The same question applies to whether you can afford the deductible (if you cannot afford to rebuild) if there is a quake that damages your home.

      Last I checked, the deductible was near $50k for me.

      I'm still not sure what the right answer is. Plus, it may depend on your lender's policies...

    • kevin
      Kevin Harrington

      I hear you. That high deductible sounds scary, but the uninsured alternative is most certainly worse in the likely case a rebuild is needed.

      For example, say you’re insured for $250k with a 20% deductible, and a total rebuild is necessary, they’ll cut you a check for $200k. It’s not a question of affording the deductible, it’s a question of what you can afford to build after the deductible is taken out.

      If you have damage less than $50k, your house will most likely still be inhabitable. If you can’t afford the repairs, you can do save up and do them later. 

      Insurance is ideal for the case where your house is not inhabitable. Being uninsured is dangerous if you have a mortgage, like me. You can’t walk away. You’re still responsible for making that payment. It’s easy to be underwater after an earthquake, even with a fair amount of equity. It's going to be impossible to sell that land for what it is worth the day before the quake, because the market will be flooded with people trying to do this.

    • I feel like the answer is going to be similar to those affected by the Santa Rosa wildfires. Except, your homeowner's covers that.

      And to compound the problem, your property tax lists the value for the land and for the structure separately. If you don't keep up with the true cost of rebuilding your home, it's highly likely you will not be living in the same house.

      I was really disappointed when the government opted to allow flood and earthquake insurance out of the standard homeowner policy. It's sorta like they did that on purpose to insure the insurance companies are pretty much not the ones gambling.

    • martha

      I'm never a fan of the insurance industry, to say the least. But I do sort of understand why earthquake policies need to be separate from, and more costly than, the regular homeowner's insurance. Generally (Santa Rosa fires being somewhat of an exception), fire insurance doesn't count on a fire wiping out huge numbers of homes in one fell swoop. Major earthquakes, however, can and do. I can see an insurance company going belly-up on earthquake coverage.

      We have never had earthquake insurance due to the cost and the high deductible. But lately I've been thinking that, while we have been winning this gamble for over 25 years and have saved a lot of money on the premiums, it might be time to add it so we don't have to worry about spending all of our retirement money on rebuilding.

    • kevin
      Kevin Harrington

      I'm never a fan of the insurance industry, to say the least.

      Agreed! The sad reality that in human time, not geologic time, earthquakes are pretty unpredictable. The feared M9 Cascadia Subduction Zone quake will probably never happen in our lifetimes, but it's possible, and it could clean out insurance companies if it does.

      My guess is that insurance companies have built in tons of padding in the premiums to still make money in the case of a very catastrophic EQ. Which means until that big one, they are probably raking it in, right?

      Quotes I’ve got have premiums of about 2% of my structure’s value per year. 50 years to build an equivalent rainy day fund seems like a long time. So much money... So much at stake... So unpredictable.... Do you think it’s worth it?

    • martha

      We keep debating that. I just used the California Earthquake Authority's calculator, and with the Homeowner's Choice option (you get to pick and choose the coverage), and the optional stuff turned off, the premium is still something like $6K per year. So it's a big decision. I know it's a big gamble. I'm more cautious and inclined to pay for it for peace of mind, but my husband is more analytical and may decide it's not worth it. I hate gambling, and I hate spending money on something I don't need; but I do that every year on homeowner's insurance, and car insurance (though we have had to use that a few times), and would never dream of dropping either of those. And we are planning on increasing our umbrella policy, though we have never needed that, either. It's just the price tag of the earthquake insurance that gives me pause.

      As for the companies raking it in -- I believe that the private companies are only conduits for the insurance; it's the CEA, the non-profit state agency, that actually insures for earthquake. So hopefully, that money is being managed and invested just for earthquake payouts. I am guessing the private insurance companies who sell the CEA insurance get some of the premium, which seems fair enough.

    • yaypie

      The feared M9 Cascadia Subduction Zone quake will probably never happen in our lifetimes, but it's possible, and it could clean out insurance companies if it does.

      This is actually why I haven't bothered getting earthquake insurance even though I live in Portland. If the Cascadia quake hits, the damage to the entire Pacific Northwest will be so catastrophic I can't imagine my insurance would actually be able to pay out. And even if it did, I'm not sure I'd want to keep living here in the aftermath given how wrecked the infrastructure would be.

      My post-earthquake survival plan is basically "drive east as quickly as possible". 😬

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