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Earthquake insurance, how does it work?


So, I'm buying a house, and shopping around on homeowner's insurance policies. I've had car & renter's insurance with USAA since forever, because they have great rates AND great service, which is an amazing combination. But now I'm faced with homeowner's insurance, a slightly different puzzle. Looking around, I can find quotes for around $2k a year, which seems sort of reasonable, I guess. One place said that this included earthquake coverage. USAA's was around $2k, but then if I added an earthquake policy, that's an additional $5k (or maybe the whole thing is 5k, can't remember...either way, it's a big jump). I need some info from people who've gone through this process before - from whom did you buy your HO insurance, do you have earthquake coverage, what's been your experience with the company, all that good stuff.

Stashed in: California

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I don't buy earthquake insurance.

All insurance is a business designed to make money.

Therefore you are expected to pay more to the business than you would expect to collect, on average.

Here's a Quora question: "Is earthquake insurance a worthwhile investment in California?"

http://www.quora.com/Is-earthquake-insurance-a-worthwhile-investment-in-California

Only 10% of home owners have it in California:

http://www.insurancequotes.com/home-insurance-earthquake/

Worth reading: "Do you need earthquake insurance in San Francisco?"

http://coverhound.com/blog/post/need-earthquake-insurance

Are you a home owner, or a renter?

Also, I totally understand about insurance being a business, and therefore with a goal to make a profit. I will also note that at least indirectly, I've probably gotten more out of my car insurance than I've put in - bought a car in Dec '00, rear-ended someone (who I swear didn't have brake lights, but whatever) in May, and my insurance company spent at least $5k to get my car pretty much back to like-new condition. Then in Oct '11 or so, was rear-ended, and my car was totalled. I had offers from my company and the other guy's, both for around $10k. So that's $15k that they paid out for my car, and I'm confident that I paid less in premiums over those 11 years.

Yes but your rates get raised going forward for being higher-risk.

You are right though that some people do benefit from insurance. If everyone paid more than they got, we'd all think it's not worth doing and stop paying.

But statistically you are expected to pay more than you receive. That's the math of insurance.

I'm a home renter, which means earthquake insurance makes even less sense for me.

As far as I can tell, my premiums haven't actually gone up. Blah blah blah, anecdote != data.Do you have renter's insurance? As I recall, even in CA, most of those policies do include earthquake coverage, since it's only going to cover personal property, and not real property, since you don't have any of the latter.OTOH, if I do buy an earthquake policy, and it does cost me $5k a year, and in 10 years we get the big one and my house is demolished, it should pay to rebuild the house, minus a deductible, of course. Still, if the deductible's 10%, so around $40 or $50k, and I've paid $50k in premiums, they'd still be building the house for $400-500k.Mother Nature doesn't use a fair coin, as far as I can tell. Hmm.

I do have renter's insurance, but the deductible is so high ($100k) it won't pay unless I lose everything.

You're right, Mother Nature doesn't use a fair coin. $5k a year sounds like a lot to pay for peace of mind.

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