Divided opinions over value of earthquake insurance
Tom Fuller could tell how well folks understood earthquake insurance once he mentioned that he has a policy for his damaged home in Napa.
The uninitiated responded, “Well, you’re lucky.” The more knowledgeable said, “I hope you didn’t hit your deductible.”
Fuller, a public relations consultant, said the repairs from last month’s magnitude-6.0 quake won’t come close to his $48,000 deductible - the amount of structural damage his home must suffer before the insurance company becomes liable for major repairs. That means he will cover virtually all the damage from the Aug. 24 temblor to his 1940s-era home south of downtown.
Even so, his insurance policy still gives him peace of mind that he could rebuild should a massive, 1906-type quake ever level his city.
If needed, Fuller said, “I could afford a $48,000 hit. I can’t afford a $480,000 hit.”
Fuller is a rare breed among Napans, whose city last month suffered one death and an estimated $362 million in damage to its buildings, roads and other infrastructure. Only 6 percent of Napa County homeowners have earthquake insurance, compared to 10 percent of all Sonoma County and California residents, according to the California Earthquake Authority, the public entity that works with private insurers to offer residential coverage.
Only 9 percent of state businesses had quake insurance last year, according to the state Department of Insurance.
The number of residential policies has declined statewide from 1.2 million in 2004 to 1.1 million last year. But with pending changes, more homeowners may begin to consider the coverage.
Even so, earthquake insurance elicits head-jarring differences of opinion among Californians.
Insurance experts say the lack of coverage means that homeowners, businesses and the state as a whole are going to suffer terrible financial harm when a major quake strikes. They consider earthquake coverage similar to other insurance offerings for life, health and automobiles. And they say that other countries take a more sensible approach to managing the risk of catastrophic quakes.
Many homeowners counter that quake insurance is too expensive and the deductibles are too high.
“The premium cost is so prohibitive that it makes no financial sense,” said Lynda Jensen, a Napa resident who lost a chimney and sustained other damage to her 1902 Queen Anne Victorian near downtown.
Jensen, manager of Wine Country Group real estate brokerage on Main Street, said she has yet to encounter anyone in town with earthquake insurance - not neighbors whose homes were red-tagged or fellow business people who scrambled to reopen their doors or the landlord of her reinforced-stone masonry office building, where interior glass windows blew out into diamond-shaped rubble and heavy roof stonework crashed down outside near the back of the building.
Jensen’s own baby blue and white home soon will have a new chimney, and she plans to have a structural engineer look over cracking and slight twisting at its front and back walls. So far the damage amounts to about $30,000, she said.
Despite the losses, she remains uninterested in earthquake insurance. If she had bought such coverage, she said, the deductible level would have been $58,000, meaning she still wouldn’t have received significant help even after a 6.0 quake.
“So what good is it?” she asked.
Another quake coming?
As the Napa temblor showed, California is earthquake country. And Santa Rosa belongs among the communities with tales of loss.
In the 1906 quake, at least 100 people perished here, while the city’s domed courthouse and many downtown structures collapsed. As well, the wreckage from a pair of 5.6 and 5.7 quakes in 1969 led to the remaking of the downtown, including the construction of a modern shopping center atop six blocks of former hotels, theaters and other businesses.
Looking forward, the state has more than a 99 percent chance of experiencing a magnitude 6.7 quake or larger by 2038, the U.S. Geological Survey predicted in 2008. Such a quake would be roughly 20 times greater than Napa’s, said Glenn Pomeroy, CEO of the publicly managed California Earthquake Authority.
In Napa, about 400 homeowners to date have filed claims with insurance companies whose policies are written in cooperation with the earthquake authority, Pomeroy said. The most common payments likely will be $1,500 per home for emergency repairs, followed by living expenses for those who had to temporarily move from their residences. There also could be payments for damaged contents and structures.
While Napa was a moderately strong event, the magnitude-6.7 Northridge earthquake in 1994 showed the nation’s insurance industry how costly such disasters could be.
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