Should You Buy Earthquake Insurance?

I’m often asked about earthquake insurance—do most homeowners in San Francisco have it? Do the majority of condo buildings have an earthquake policy?

Only about 12-15% of California homeowners have earthquake insurance, and I believe that ratio drops further in The Bay Area and San Francisco. The reason behind this is that earthquake insurance is very expensive. In a condo building, it doubles your homeowners association dues (HOAs). Additionally, most policies come with a 10-15% deductible. This means the damage to the building would have to be pretty severe in order for you to use your coverage.

What do you look for when evaluating how well a property will hold up against an earthquake? Take note of its overall construction material (i.e., wood-framed buildings tend to hold up better against ground shaking). Review the hazard report rating (i.e., is the building located in a Zone A–the most susceptible to an earthquake, or a Zone D/E, which would have a better chance in an earthquake). And consult a general contractor about how seismically sound the property may be (i.e., foundation bolted, etc). If a property was built before 1906 (year of the big earthquake) and it’s still standing, that’s a good indication that it’s been constructed well.

I have sold many condos in San Francisco over the past decade, and maybe one or two condo buildings I’ve sold actually had earthquake insurance. Ironically, the buildings with earthquake insurance tend to be harder sells, because the HOA dues are prohibitively expensive for buyers. If you’re buying within a building that doesn’t have earthquake insurance, the HOA would have to decide whether to obtain that coverage. It’s not available on individual units.

If you’re interested in more information, contact your favorite insurance rep and inquire about the specifics for earthquake coverage.

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Comments

  1. A very important topic.
    IMO most of us accept far more risk than we would like to. We’d like to be insured for all sorts of things, but we can’t justify the cost based on what we perceive the risk to be.

    HOA’s a not people, they are as little as a single unit, and up to many hundreds of units, self governing associations. They are charged by the state with duties to act reasonably in their efforts to protect the financial well being of their unit owners relative to property maintenance, reserves for repairs, and the purchase of insurance.

    It should be noted that Earthquake insurance is generally available both to the HOA as well as to the individual unit owner. Everyone should at least look into it. It may cost more than your basic HO-6 policy, and it could easily
    be multiples of the cost of the association’s basic policy, but that does not
    mean it would impact monthly dues as dramatically. It all depends on how many unit owners share the cost.

    Of all the false senses of security that those of us living in earthquake land share, the two most common or worst are: we’re OK on solid ground, and this old house is well built because it’s withstood so many shakes before.
    Are you kidding yourself? Check with the USGS: the transmission of shock waves through the ground depends greatly on a) how close you are to the epicenter of the event b) how deep down that event is generated c)
    what direction the shock wave is traveling d) the severity of the event e) the duration of the event.

    We’ve all been exceedingly lucky to have not lived through the horror that was the S.F. 1906 earthquake. Many engineering safety features help our current survivability, but S.F. has been extremely lax in spending for safety
    during the past 100 years.

    I agree that we’re better off if we are built on rock, or solid ground instead of sand and fill like so many. But that alone may not always be enough. Is
    the house well bolted? Is the foundation well constructed? Is the home
    strapped or rigged in a manner that holds it all together and transmits the stress forces from the roof and bearing walls to the foundation? A general contractor isn’t normally qualified to advise on that – a structural engineer is.

    Other than foundation bolts, the most commonly ignored safety item for earthquake is a very inexpensive little pipe shaped gas shut off valve that is designed to immediately sense an excess flow of gas, and protect you and your home from blowing up and burning down. Too bad PG&E has not been mandated to install them for everyone over the past twenty years.

    • insidesfre says:

      Thanks for your comments! I think it would be great if more real estate agents talked about this earthquake topics with their clients. I’ve heard from some people who’ve bought homes in the past few years who didn’t even know they were in a liquefaction zone. Good to have the knowledge, and take steps to minimize risk. Thanks again.

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