(Justin Sullivan/Getty Images)

Last weekend’s South Napa Earthquake is a dramatic reminder to Bay Area property owners that they’re vulnerable. The city of Napa estimates that it has sustained $300 million in damage so far to privately owned buildings. And yet, only one of nine Californians has earthquake insurance. We’ll discuss who should have earthquake insurance and how to get it.

Guests:
Bob Hartwig, president and economist at the Insurance Information Institute, an industry trade group
Glenn Pomeroy, CEO of the California Earthquake Authority, a public-private provider of earthquake insurance
Amy Bach, executive director and co-founder of United Policyholders, a San Francisco-based nonprofit that advocates for insurance consumers
Robin Respaut, finance reporter for Reuters News

  • Chemist150

    When we bought a house, I got a quote and it was about $1200 a month. Consider $14.4k a year covering $150k damage. I’ve been there 5 years. We save the $14.4k instead and get gains (dividends, etc). After 10 years, we’ll have $54k than the insurance policy would cover.

    The insurance guy literally told me that it makes more sense to save the money myself.

    This Insurance salesman you have on is not making sense to logical, organized, rational people.

    If the damage is that great, the insurance is not going to cover it anyhow.

  • sally

    I was always told by other homeowners that earthquake insurance doesn’t payout unless you have a total loss. If you have cracks or minor damage, it is not covered. Is this correct?

  • Another Mike

    We had earthquake insurance, from our regular carrier, until the one-two punch of Loma Prieta and Northridge drove regular carriers out of the business. CEA coverage was much more expensive, with a much much larger deductible, so forget it.

    The federal government should sell heavily subsidized earthquake insurance to people in earthquake country, as it sells heavily subsidized flood insurance to people on floodplains.

    • Chris OConnell

      I disagree since I don’t think the federal government should use the general public’s money to sell heavily subsidized flood insurance to people on floodplains. Likewise, it should not sell heavily subsidized earthquake insurance to people in earthquake country. I don’t think the federal government should subsidize home ownership through the mortgage deduction, either. Uncle Sugar has its limits.

      • Another Mike

        I would be happy if it was all or nothing. But subsidizing one set of risky behavior, while telling other risk takers that they’re on their own is not right.

        Friends of mine in Texas collected on their flood insurance three times during the 1970s, His aunt had a house on stilts, which seems more of a free market approach.

        • Chris OConnell

          Then I guess I really agree with you. I don’t think they should be in the business to begin with but since they do it for flood insurance, it is plainly unfair that they don’t for earthquake insurance.

    • montegobay305

      I’m not sure your wording of “subsidized” is valid or not. The way i understand the government flood insurance is that it pools the insurance market where the private companies are too fragmented or unwilling. Many times it could be the flood maps are for the 1 in 100 years “flood” and that covers a lot of South Bay towns. We are not taking about Malibu on the edge of the beach scenarios.. So yes, we should have fed pooling of earthquake insurance – the pool would have more participants and should give some level of benefits that private companies don’t want to provide (70% coverage or…something like that).

  • erictremont

    Seems to me that many more quake insurance policies could be sold if agents who sold regular homeowners coverage had a strong financial incentive to offer quake coverage. All of the agents I have dealt with send me the obligatory notice that I have the right to purchase a CEA policy, but I get the impression that CEA efforts to market their policies are grossly inadequate and there is essentially no incentive for any agent to aggressively promote their coverage.

  • lalameda

    My concern is that if an earthquake is severe enough to significantly damage my home, there will be no “land” left under it. So it would never be allowed to be rebuilt. So, how would the insurance cover rebuilding somewhere else?

    • Another Mike

      Check out homes in the Marina to disprove your thesis.

      • lalameda

        The land under my house is deemed to be likely to succomb to liquifaction.

        • Another Mike

          No part of the Bay Area is more subject to liquefaction than the Marina District.

          • lalameda

            Well, that might be somewhat of an overstatement.

  • KoYaChi012

    We bought a home in San Francisco 2.5 years ago. At the time, I was adamant about purchasing earthquake insurance. However, when the time came, my insurance agent talked me out of it. She pointed out that our home (built in 1890) had survived all the major earthquakes and that we were in the middle of the block. She told us that it’s usually the houses at the end that fall down – not the ones in the middle since they are buffered on both sides.

    Glenn from the CEA says the average premium is $800/year, however it looks like our premium would be closer to $7,000. Is this based solely on value? Does it have to do with zip code (which I noticed I had to input to get estimate)?

    Question – should we be buying coverage in the amount to rebuild or the value of the property? In SF, most of the value of houses has to do with the land it sits on, not the structure itself.

    • Michelin

      I’ve anecdotally heard from other friends that they’ve heard the same thing from insurance agents as they’ve inquired about earthquake insurance. It was from this advice that I opted out of purchasing it. Seems this is not an isolated case of a rogue or misinformed agent.

  • Statistical Sanity

    I have an issue with the first statement this program started with — 1 in 9 Californians have earthquake insurance.
    C’mon people. How many Californians are children? How many Californians own a house?

    Good apologetic thinking should provide the characteristics of the statistics, otherwise it’s meaningless and a very poor use of statistics.

    This will happen in advertising (much to my chagrin) but shouldn’t be a part of an informed and intelligent discussion.

    • Another Mike

      If a family of five lives in a house with earthquake insurance, then all five have earthquake insurance.

      • bldpmpr

        they stated on air that it’s 1 in 9 homeowners.

    • Doug F

      They clarified later–only 1 of 9 private homeowners in CA has quake insurance.

  • Brad Mathews

    I just checked the CEA and my premium would be $2000, double my home owner’s insurance. I am on solid rock on a hill in San Jose. In the ’89 quake things barely moved on the shelves. The quote tool should use Alquist-Priolo and Liquefaction maps rather than a ZIP code to better determine the specific risk to my house.

  • lalameda

    The most important thing you can do is know where the gas shut-off valves are — for yourself and your neighbors. Or buy auto shut-off valves that shut off the gas automatically if there is a sudden rush of the natural gas. Use devices to secure tv’s and other “tippable” things to your walls.

    • Another Mike

      There are a number of common-sense, relatively low cost things you can do detailed in Peter Yanev’s Peace of Mind in Earthquake Country, latest edition in 2009.

  • Andrea

    I have an earthquake insurance policy with the CA Earthquake Authority- my insurance company facilitates this transaction for me, but I was never presented with options (as far as amount of coverage, deductible options, etc), just a 500$ annual bill to fit. Is it true that my insurance company cannot offer me an earthquake policy and that I must purchase through the CA Earthquake Authority? Where can I find more information about what my coverage would do for me in the event of earthquake damage? What if an earthquake causes a fire…would this fall under my homeowners policy or earthquake? I own a small condo in SF. Thank you!

    • lalameda

      Does your HOA have any earthquake coverage? Ours used to, but the board decided to drop it after the rates went up so much.

  • Pierre Khoury

    I just used the calculator on the CEA website. I live in a 2 unit Victorian building in the city and we bought the building for $1million 10 years ago. At that value and with a $100,000 deductible, I got a quote of $5875. That is absolutely not affordable on top of the taxes and regular insurance that we must pay each year. We have shored up our building as best we can and will take our chances. We can’t afford that insurance.

  • sam l

    How doee the CEA guarantee a payout if the big one hits. Will CEA have enough financial backing (how much?) to guarantee a payout for everyone affected at 100% of what of the policy insures?

  • Kelly Lynn Jones

    Please talk about renter’s earthquake insurance and how it works (most of us do not own a house in SF!!) Also, as a small business owner I have found it really difficult to get. Can you also talk about business earthquake insurance? As of now, the show is only focusing on home owners.

  • Amanda

    When the Big One hits and there is most massive damage, will the insurance companies actually have enough resources to pay out all of our earthquake claims to the max? Isn’t there a provision in most policies that allows them to claim bankrupcy and walk away from it all?

  • EIDALM

    The biggest human death from a single earthquake in recorded history happened in the year 1201 AD in Egypt when more than one million Egyptians were killed ,it was 7.6 in magnitude ,a big chunk of the city of Alexandria fell into the sea ,the quake was felt across the middle east and southern Europe,

  • Patricia

    I hear people say that if there is the “big one” – there will be so much damage that the insurance companies will go broke and not be able to pay… is this true? How is the money protected?

  • Davey in Crockett

    What advice do the guests have for Renters?

  • forumcomments

    The $800 average premium that Glen keeps citing is not relevant for SF. My typical 2 story victorian that has been fully earthquake retro fitted has a CEA premium of $3500/year, no contents coverage.

  • John

    I don’t know where the Insurance guy gets an average premium of $800. I just used the CEA calculator and it gives me a premium of $6500 per year, with an exclusion of $150,000…and that is based on a value that is probably well below replacement cost of our home. My feeling is that any damage we sustain, being high on a rocky hill in SF, would fall well under the deductible. Just not worth it.

  • charles reppe

    What if the catastrophic costs exceed the ability of the insurance companies to pay out? How solvent are they?

  • Terri Moss

    I just used the CEA calculator and my home would require a $4,000 annual premium. It didn’t allow me to discuss bracing and other strengthening we’ve done. Seems at great contrast to what is being discussed right now.

  • John

    Just ran the calculation on the CEA website. Annual cost based on current insured value of the home (probably low in this market), was $6800, with a $150K deductible. As we are located on a solid hill on bedrock, I am betting that any damage would fall under the deductible. So buying the insurance would be throwing money away. I don’t know where the guy gets the “average premium” of $800. That would assume a home value of around $100,000. Show me one of those.

  • Arcadia

    I just got estimate on CEA website, and my annual premium would be in excess of $5,000. The 15% deductible would be nearly $217,000. This is for a house with a brand new foundation, bolts, tie downs running from foundation to roof and shear walls throughout the entire house. The coverage is simply unaffordable. My house would have to suffer more significant damage than is likely given the seismic upgrades to ever get a payout.

  • Michael Eager

    The problem is not just the premium which discourages people buying earthquake insurance. It is also the deductible. Insurance on my house would cost $2800/year, and have almost $50,000 deductible. In the case of an earthquake, my guess is that the cost of repairs would be less than the deductible.

  • Jim

    Can the insurers guarantee payment of all claims? Couldn’t they be “overdrawn”? Thank you.

    • Doug F

      The CA quake insurance authority has the backing of the state. Private insurance companies facing occasional very high risks like big quakes normally buy reinsurance, which is insurance for insurance. Swiss Re is the biggest company, but there are others. This goes way back–it saved the companies’ bacon after the SF quake, which was largely covered by fire insurance.

  • Selostaja

    I checked and my premium would be much more than double my current insurance; I am what is called ‘house poor’, barely getting by in San Francisco. The value of my house is now so bloated, the cost to insure is insane.

  • LF

    We were in L.A. during the big 1994 Northridge earthquake, a 6.7 on the richter scale. It was declared a national disaster by President Clinton and many homeowners received FEMA money for the short term, including rent for a home while they rebuilt.

  • melissa

    This entire program felt like an advertisement for the insurance industry. The bottom line is earthquake insurance is out of reach for most homeowners and consumers are highly skeptical of an industry that is notorious for slow or non-payment after a disaster. It was also very interesting that the program encouraged renters purchasing renters insurance without any discussion regarding whether personal property damaged in an earthquake would actually be covered. Very disappointing program indeed.

  • Concernedresidentofearth

    I listened to the program today and I believe it was Mr. Pomeroy who was promoting the notion that the average policy cost $800. I used the CEA calculator and our policy at 10% deductible was $8000. $8000! And we would still be out $100,000 before the insurance paid a dime. And this premium was with a full blown seismic retrofit on the house! Even a $500,000 house built 40 years ago cost over $2500 per year.

  • Terri Moss

    I agree with Melissa. Great infomercial but when you use the premium calculator its reality was much different than what was portrayed in the program.

  • MG

    I think people on this forum are getting very high quotes because they perhaps are quoting the price to buy/sell the house, not build it from the ground up. Eg a house in San Mateo may cost 900K but will take 450K to build and that’s what insurance covers. Just a thought. The CEA quotes were comparable to my home insurance quote a little higher and around 1500/-

    • Guest

      correction 450K to build.

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