With the last little Earthquake in Wells, Nevada a lot of people are adding or at least asking about Earthquake coverage for their home policy. It has come to my attention that there are a few companies out there that charge very little for Earthquake coverage.
Some large insurance carriers do not offer earthquake anymore. So how is it that some can charge so little, while others charge much more or don't even offer that coverage? Finally I had the opportunity to look at a policy by one of those companies that are really cheap. I think I understand now why they are cheap. This is of course based on what this one company does. Normally when somebody wants to add earthquake to their home policy, they will find that if they pay 500$ per year just for homeowners they will pay (give or take a little) another 500$ to add the Earthquake coverage. It is difficult to say, since each home is so different. But it is safe to say that most homes' premiums usually double by adding Earthquake.
Let's say that the home is insured by ACME insurance and the homeowner found that Earthquake coverage was much cheaper by purchased this coverage from XYZ insurance for 250$. Based on this policy XYZ covers Earthquakes and will rebuild your home in the event of one. The variable is of course what kind of deductible you choose. I have seen options range all over the board but, the normal range is from 5,000$ to 20,000$ depending on how much your home is insured for. Considering your home might need to be rebuilt completely, 5-20,000$ for a deductible is not that bad. WHAT A GREAT DEAL!!!!!
WRONG!!!! Eventually you will have a home that is new, but what about your personal property? Your homeowners doesn't cover that because you are not paying ACME for Earthquake to be covered. The XYZ company saved you a lot of money, but now your personal property is not covered. As bad as that may seem, where do you plan on staying until your home is rebuilt? Again you have no coverage with ACME because XYZ wrote the Earthquake coverage. Based on the fact that there was an Earthquake and your home is destroyed or badly damaged, chances are that everybody else is in the same boat. In other words, it is doubtful that your home will be rebuilt right away. I think we all know what the cost of a motel or an apartment can be? Let us not forget that this person is still stuck paying the mortgage for a broken down home. Saving money is great, but make sure that you have the coverage you need and deserve.
Like one of my clients said, "Insurance is a rip-off until you really need it."
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