Are you one of the 88%?
If you are, you’re either a shrewd saver or a reckless gambler.
According to the Insurance Information Network of California, more than 88% of homeowners in the state – and more than 90% of businesses – forgo the expense of buying earthquake insurance, saving perhaps $400 to $1,200 a year in annual premiums.
But an insurance network spokesman said that they could be taking a huge risk with their biggest asset – their real estate.
Tuesday’s 7.4-magnitude earthquake that rattled Mexico raises the age-old question that’s dogged California homeowners since insurance companies raised premiums and deductibles in the wake of the 1989 Loma Prieta and the 1994 Northridge earthquakes: To buy insurance or not to buy.
Mexico appeared to have escaped major damage in Tuesday’s quake. One building in the capital appeared close to collapse, and more than 60 homes were damaged near the quake’s epicenter.
“This should be a reminder to everybody in California: We live in earthquake country,” said Pete Moraga, spokesperson for the insurance network. “We need to be prepared – not just physically, but financially as well.”
Companies pulled back in offering earthquake insurance after the Northridge temblor. According to the insurance network, Northridge caused an estimated $19 billion to $29 billion in insured losses.
Premiums rose, and for a time, insurance came with 15% deductibles (although you now can buy earthquake insurance with a 10% deductible).
The typical Orange County homeowner who declined to buy earthquake insurance in the past 17 years may have saved between $8,500 to $17,000.
But Moraga thinks they could lose more in the long run when the Big One hits.
“If you don’t have the coverage, your deductible is 100%,” he said.
Moraga said his organization hears “all the excuses.”
“Well,” some argue, “the government will bail us out.”
But Hurricane Katrina showed that’s not necessarily the case, he said. And property owners still are liable for their mortgage payments, even after their homes or businesses are destroyed. (Why lenders
“If less tan 2% of homeowners don’t have earthquake insurance, who’s going to pay that bill” when the Big One hits, he asked.
Moraga noted that more insurance companies – not just the California Earthquake Authority – are offering earthquake insurance, resulting in lower premiums.
“We needed to be better prepared,” he said.
Earthquake preparedness tips:
- SECURE IT NOW: Conduct a “hazard hunt” to help identify and fix things such as unsecured televisions, computers, bookcases, furniture, unstrapped water heaters, etc.
- PLAN: Make sure that your emergency plan includes evacuation and reunion plans, out-of-state contacts, and emergency supplies.
- EARTHQUAKE KIT: The first 72 hours are the most critical when power, water and phones likely are out. Have enough food and water for three to seven days, first-aid kits, a fire extinguisher, flashlights, a battery-powered radio, a camping stove or barbecue and an adjustable wrench to shut off gas. Also have blankets, extra clothing, cash and medications.
By JEFF COLLINS / THE ORANGE COUNTY REGISTER