Do you have earthquake insurance?
If not, don’t feel alone.
Along the U.S. West Coast—and I include Alaska in the region—only about one in ten homeowners has purchased insurance against a quake.
The Puget Sound region resides along the Ring of Fire, with more earthquakes than anywhere else in the country (unless you happen to live next door to a fracking site in Oklahoma), and only 10 percent of us have earthquake insurance?!
What the hell are we thinking? Well, one issue is cost. Earthquake insurance is expensive.
Yes, it can be. Nevertheless, part of our role as financial planner is to help identify blind spots in your financial plan, including those that fall into the risk management category. While earthquake coverage is not for everyone, we recommend that you consider how much of your net worth is tied up in your home. If your home suddenly becomes uninhabitable after an earthquake, would you have the hundreds of thousands of dollars you’d need to replace it? If not, what would you do?
Despite my pro-earthquake-insurance stance, I realize that the decision is not so simple.
It’s a personal decision, unlike, purchasing auto insurance, which is required by law. Your choice depends on what kind of house you have—old or new, wood or masonry, etc.
It also depends on your personal finances: could you afford to rebuild your house without financial help? Do you have a second home where you could live? Do the deductible and premiums work for your budget?
There is actually quite a bit to consider.
If you don’t have earthquake insurance—or if you do, but wonder whether those expensive premiums pencil out—it is worth a few minutes of your time to learn a bit more about the subject, and perhaps talk it over with someone knowledgeable.
If you’d like to read about it, here is a brief article about the pros and cons of earthquake insurance.
If you’d prefer a video about earthquake insurance, check out this news segment from KTLA in Los Angeles. They know a little bit about earthquakes in L.A.
One more thing: a shout-out to a client, Mr. D (you know who you are) for his excellent suggestion that we blog about this topic. Thanks!