With all of the attention on Haiti the last few days and the powerful destructive capabilities of an earthquake, it’s probably worth asking the question whether you should buy earthquake insurance. For years I questioned whether we should have the insurance and I felt as if I was living on the edge a bit. For those of you that haven’t spent much time reading through your insurance policies, it’s almost unheard of for an insurance company to cover losses from an earthquake as part of your standard homeowners insurance. Both earthquakes and floods are usually explicitly excluded from homeowners policies.
What would happen if we had a major earthquake that caused significant damage to our home? Where would we live? Could we afford to rebuild? How much of a blow would it be to our finances?
After going through the ugly answers to each of these questions, I did some homework and decided that, for us, it was too risky not to have earthquake insurance.
I looked around and found very few options for earthquake insurance. We ended up going through a company called Geovera. The deductible on this policy is very high. If we were to have a catastrophic earthquake we would be on the hook for $49,500 before the policy would start paying. What does it cost for something like this? For us it’s $368 per year. This policy is not meant to pay out for a light shaking that cracks some sheetrock in the house, instead it’s designed to cover only a very large loss. Since I live in the Pacific Northwest and we have a MASSIVE fault line just off the coast, it feels like a good policy to have. The experts believe our area is due for a strong earthquake due to the fault lines in the area and the fact that we haven’t had a major earthquake in many decades.
Geovera is rated as an A- for financial strength so I’m hopeful that they would be able to cover our losses in the event of a major disaster.
If you live in an area that’s prone to earthquakes, have you considered getting earthquake insurance? What would you do if your house was destroyed like many of the structures in Haiti?
I have Amica, it’s like an extra 100-150 for earthquake, of course that’s not the west coast.
Wow, talk about a reactive move. I live in the Pacific Northwest too (WA, also near a fault line), and I feel no need to have earthquake insurance.
First: our building codes incorporate engineering to cope with the stresses of earthquake insurance for the earthquakes we are most likely to get. Even back in the late nineties when we had the magnitude ~5 earthquake, no one I know had any serious damage.
Second: The “Big One” that is supposed to occur is completely unpredictable. You are gambling that an earthquake is going to happen, and that it is going to cause enough damage to breech your $50,000 deductible. Go ahead and calculate the odds of that happening.
Third: your money would be better spent preventing the possibility of earthquake damage. Most states in the PNW offer earthquake retrofitting classes for free. Then you can apply the almost $4,000 you are going to spend over the next ten years on implementing those retrofits (usually just making sure the house is properly bound to the foundation, and maybe some other reinforcements).
It always amazes me that people react to what is being reported by the media – these events are extraordinary, that is why they are being reported. Spending money to have coverage for events this extraordinarily rare just seems like an emotional response. You lived this long without earthquake insurance, why do you need it now?
If I haven’t swayed you, don’t forget – you also need volcano, flood, and tsunami insurance. Just in case.
I wouldn’t call it a reactive move. I’ve had the earthquake insurance for the last 5 years. I buy it for the same reason that I have homeowners insurance, car insurance, and life insurance. I’m making the personal choice to manage the risk by spending a little bit of money. Certainly not everyone will make the same decision. Sounds like you have your own approach to managing risk.