This is a question I’ve struggled with over the years and have posted about in the past. I’ve gone back and forth on whether I should have earthquake insurance. A few years back, I decided that the odds were against me and I bought some. The premiums are $370 per year which is not that bad for a $315,000 house.
A few things help me keep the price down. My house is on a level lot, it’s pretty much all wood and is newer construction that incorporates a lot of the more current earthquake reinforcements.
What brought this up for me again is CNNMoney has an article that talks about who should consider getting the coverage. Since I live in the “RED†zone (Pacific Northwest), it just reinforces my decision to have earthquake insurance. There is no question that we will have a large earthquake here. The only question is when. Paying $370 per year gives me the peace of mind that I can put my house back together if we have the “big oneâ€.
Check out the map and see if you live in a hot zone.
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Does your lender require it? If they’re willing to take a multi-hundred-thousand-dollar hit they must think that the risk is pretty small.
Compare the cost of writing off your mortgage (7 years of bad credit) multiplied by the chance of the house being completely destroyed against the cost of insurance.
Last time I checked, even in the “red” zone, the insurance cost was much too high for the coverage provided. When the lenders start requiring it, I suspect costs will drop.
That’s a good point Steve. I suppose I am, in a sense, helping to insure the lender against a loss. What isn’t clear to me is if I walk away, and have another house that’s paid for (as well as significant assets), could they come after those assets as well.
Hazzard