You know, I’ve got a lot of insurance. I’ve got auto insurance, homeowners insurance and life insurance. While that seems like a lot of insurance, I don’t have earthquake insurance. For those of you living in the midwest, you probably are saying to yourself, “yeah, so what”. Well, as much as I’d like to say that too, I have to face the fact that we live in Seattle. We’ve had a little bit of shaking over the last 10 years, but nothing that was terribly damaging. The experts think we are going to have a doozy here sooner or later.
So, it could happen at any moment. Or, it might not happen for a long time. Because I don’t know which, we’ve been considering getting earthquake insurance. I called today to find out how much it costs. Here’s what they told me:
Earthquake insurance has a pretty large deductible. It comes in a few flavors. You can get a policy with a 10% deductible, 15%, or even 20%. What this means is that if your house is damaged, you have to cover the first 10% of the value of the home before the insurance starts paying out. So, for a house like mine, that means I would have to come up with $30,000, and then if damages were higher than that, my policy would pay out. Yikes. $30k. Realistically, because the policy that comes with a 10% deductible is over $500 per year, I’d probably opt for the 15% policy. That means I’d have to come up with $45k in the event of a disaster. That policy would cost me nearly $400 per year.
So, while I thought it would be an easy decision before I called, I now have found myself mulling it over a bit more. What would you do?
$400 per year to give me insurance for any damages over $45,000 in the event of an earthquake. I wonder how bad the earthquake would have to be to get the damages up over $45k. I think the house would just about have to come all the way down and be inhabitable in order for this policy to make sense.
For my family, the decision is obvious–we’ll self insure. My wife and I are about to build our house (ourselves) from the ground up. It’s a small house that should be able to withstand anything but the largest earthquakes. In the case where the house does need repairs, I would just replace the damaged timbers or replaster the walls as needed. If the foundation needs repairs, it wouldn’t cost too much more than the deductible anyways.
Actually the midwest is due for a big quake as well. There was a 50% chance by 2000 (didn’t happen) and a 90% chance by 2040 of a quake in excess of a magnitude 6.0.
In 1811/1812, New Madrid, MO was the epicenter of a series of quakes believed to be as high as 8.9 on the richter scale. It actually changed the course of the Mississippi and was felt as far away as Quebec.
So earthquake insurance is not just for left coasters anymore… :)
Google New Madrid Fault if you’re at all interested.
I live in Southern California and my parents have been living in the same house for 18 years and even though the “Big One” is coming my dad doesn’t have earthquake insurance. I asked him why, and his response “Well, I figure if the house is ruined, then we’ll probably be better off”. Their house was built in the 50s and he figures that the house itself, while in a prime real estate section of California, really isn’t worth as much as the land is.
anonymous makes a good point. I’m assuming you live in a house, so I bet a large percentage of your house value is simply the land it is sitting on. I’d figure out how much the wood & nails on top of it is actually worth :)