Question: How important is it for Bay Area residents to carry earthquake insurance? Why or why not?
Answer: Whether a homeowner should carry earthquake insurance depends on where the home is located, how it is built, the level of retrofitting and the kind of soil it sits on.
In Marin County, the majority of older neighborhoods are built on rock and solid soil. That’s one reason most of my clients forgo the earthquake insurance. Another big factor is how much equity they have in their home, and also the amount of damage that would have to happen to meet their deductible.
Given that our median price in Marin is hovering around $1 million, and many homes will cost at least that much to rebuild, those homeowners who have earthquake insurance will spend at least $100,000 on repairs or rebuilding before an insurer begins to pick up the costs. Given the history of Marin County’s earthquake damage, many residents feel it’s more financially prudent to ‘self-insure’ and have funds in the bank for repairs should they be necessary.
However, everyone should consider the possibility that their home could be a total loss in an earthquake. The Earthquake Authority has made its insurance more attractive in the last decade, adding content insurance, an allowance for temporary housing and an option for a lower deductible. Log on to the California Earthquake Authority website to find an easy-to-use calculator that estimates premiums based on various scenarios.
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