California Earthquake Insurance

[WanderALot]

We currently use GeoVera for earthquake insurance here in SoCal. We recently got my renewal notice from them and they indicated that they are insuring the dwelling for $260,000. It seems to me that they are just taking the county assessed value of the properly (ie, land + house) and putting that number down. This being CA, the land is worth about 4 times as much as the house. In fact our homeowner's policy has the dwelling insured for about $130,000.

Seeing as how earthquake insurance has a large deductible (15% of insured value), this seems like a bad deal in every way. I'm planning on decreasing the dwelling coverage to the same level as the homeowner's policy. Anyone see a problem with this?

Also, anyone have any thoughts on CEA vs. GeoVera? It seems like CEA's coverage was not nearly as good as GeoVera.

 

[cute fuzzy bunny]

When I looked into earthquake insurance when I lived in the bay area, I found that few homes that werent very close to a known fault managed to ever see damage in excess of the deductible.

You might find that your homeowners insurance has been getting adjusted by standard factors and not by actual reconstruction costs. They might jump the homeowners up to the assessed value. Check to see if your policy has guaranteed replacement, update to code clauses and so forth. May be that your home is underinsured. That happened with my wifes old place...her policy was for about $90k while new construction replacement would be about 50-60% higher than that. The insurer had quietly dropped the guaranteed replacement in one of those hundreds of little sheets of small print revisions they send out a couple of times a year.

 

[justin]

From a legal perspective, if you underinsure your dwelling, you could have a partially uninsured loss. For example, let's say you reduce your coverage from $260,000 to $130000, and the big one hits. You survive but your house is badly damaged, but can be fixed. You file a claim for $100,000 in damages, under your policy limits, right? If it turns out that your house's replacement cost really was $260,000 and you only had it insured for $130,000, or 50% of the cost, then the insurance company will only pay out on a pro rata basis, at 50% of your claim. So you do have to be careful when reducing your policy coverage below what the ins. co. says your house is worth.

 

[lazygood4nothinbum]

my brother wanted to increase insurance on his house to account for increased construction costs. but the insurance company would only increase it based on a current assessment of the entire property (including land) not just the house. his house is only a few years old.

my house and another property of ours are tear-downs but the land is very valuable. i'd hate to think what insurance would cost if any increase had to be based on current appraised land value.

 

[WanderALot]

Thanks for all the replies.

When I looked into earthquake insurance when I lived in the bay area, I found that few homes that werent very close to a known fault managed to ever see damage in excess of the deductible.

Yeah, I know the chances are slim, but I look at this insurance like I look at my umbrella policy. Hopefully I'll never have to use it, but since the costs are relatively low ($380 for the earthquake), it seems like good catastrophic protection. So I take it that you don't carry it?

It does seem a little shady though, as far as I know only two entities are authorized to provide earthquake coverage by the CA Insurance commission. CEA, the state-run entity and GeoVera, the private sector equivalent. I occasionally get stuff in the mail from one other company but can't seem to find too much info about them.

You might find that your homeowners insurance has been getting adjusted by standard factors and not by actual reconstruction costs. They might jump the homeowners up to the assessed value. Check to see if your policy has guaranteed replacement, update to code clauses and so forth. May be that your home is underinsured.

I had this concern a few years back and seem to remember that a lot of companies had dropped the guaranteed replacement clause. Is this a California thing or is this nationwide? I believe I do have an update-to-code clause. If they have dropped the guaranteed coverage then I will really always be underinsured since I don't think I can overinsure my dwelling to reflect the increased replacement cost.

From a legal perspective, if you underinsure your dwelling, you could have a partially uninsured loss. For example, let's say you reduce your coverage from $260,000 to $130000, and the big one hits. You survive but your house is badly damaged, but can be fixed. You file a claim for $100,000 in damages, under your policy limits, right? If it turns out that your house's replacement cost really was $260,000 and you only had it insured for $130,000, or 50% of the cost, then the insurance company will only pay out on a pro rata basis, at 50% of your claim. So you do have to be careful when reducing your policy coverage below what the ins. co. says your house is worth.

So it sounds like I should find out the replacement cost of the house and match both my HO and earthquake policy to adequately reflect that, which it clearly doesn't now. I know that with every renewal, both policies seem to increase the dwelling coverage. It just seems like my earthquake policy's dwelling coverage has gone up a lot lately -- I'll have to go back and look the last few years.

 

[cute fuzzy bunny]

Mine was a lot more than $380 and that was about 9 years ago. And most of the people I knew who went through loma prieta didnt really suffer more than brick chimney damage and their total repair bills were under 10k..well below the deductible. I didnt have a chimney.

Dont have it now. Not a lot of chance for an earthquake in the central valley. Anythings possible, but its pretty low likelihood. Chimney here is structural/stucco not brick. Single story on a slab. Bet we could take a good one and just be buying new dishes and doing a little spackling.

Now if I was almost sitting on top of the san andreas or the hayward fault, I'd definitely have it.

Let me see if I can recall the genesis of that insurance thing...I noticed my policy didnt say anything about replacement cost, called the agent, he said "ohh yeaahhhh...look at that! Well, I just fixed it!". A month or two later I got a revised statement with a huge increase in the home value, the contents, etc and the price way up.

In other words, they wanted my money, and the liability piece was the same price with a low likelihood of payout, but as far as rebuilding a house after a fire in an area prone to summer fires...looks like they decided to limit their exposure a little bit.