Why the wealthy should consider earthquake insurance.
Why Senior Homeowners Should Consider Earthquake Insurance
Why earthquake insurance becomes more useful when you pay back your equity
Have you conscientiously paid off the mortgage on your main residence in the last 15 years? Do you feel like you’re making progress right now?
Be careful, You could be at increased risk Losing your hard-fought home equity when you live in an earthquake country. While paying off your home is generally a good thing, there are new issues to be aware of. How is that exactly?
As you carefully pay off your mortgage loan and become wealthier, you will slowly accumulate a “nest egg” in your nest (in your home). However, many people expect to be able to tap into that equity when they retire, either through selling the home or through a refinance, or possibly through a reverse mortgage.
But if you’re accumulating funds in your home, you need to make sure they’re properly protected. Your homeowners insurance should be rock solid, with a highly rated and respected insurance carrier. It should have as wide a coverage shape as possible. However Even the broadest form of home insurance excludes two main perils. These two hazards can both be covered under separate forms: flood and earthquake. Flood insurance should definitely be considered and is often required by the lender in high-risk flood areas. But earthquake insurance is not required by the banks. So I find that it is rarely, if ever, considered.
Time to reconsider:
15 years ago earthquake insurance was rarely sold and was quite expensive. The times have changed. Earthquake insurance for most structures is available through the California Earthquake Authority (CEA) and through several independent earthquake insurers such as ICAT, Geovera, Palomar, and Arrowhead. there are more These companies are now openly competing for your business. The landscape is slowly changing. Higher deductibles, separate deductibles, and expanded coverage for things like pools have really made it more affordable and customizable.
What is your nest egg worth to you?
If you really expect to retire on your home equity, you need to be defensive. The best protection for a home is good insurance. California has experienced many devastating earthquakes in the past, and more are likely to follow in the future. Although houses are built to much stricter rules and safety precautions, no house is immune to all earthquakes, no matter what you may believe. Destroying your home can take years to rebuild and at a cost far beyond your wildest expectations based on Demand Surge’s concept. What is Demand Boost? Demand surge is the principle behind spiraling costs as resources become more limited due to the size and scope of an event. Do you think it’s difficult to hire a contractor now? Wait for half the city to be torn apart by a big earthquake.
Destruction not completed:
Many people mistakenly believe that everything will be fine just because their home is not destroyed by an earthquake. Unfortunately from previous earthquake experiences, even if an earthquake doesn’t destroy your house, it can only knock over the foundation slightly and trigger what is known as a red tag situation. If your home has been red tagged by a local government official, your home must be repaired before you can legally reside there again. Do you and your spouse have enough money to rebuild your foundation? AND live in a hotel for two years?
How to protect yourself:
Many homeowners believe that the best defense against an earthquake is to use their money to upgrade their home with the latest technology. Bolt your house to the foundation, plywood and the like. Others believe their money is best spent on earthquake insurance. However, both strategies involve doing something to protect your investment from a known disaster. If you just ignore it, the future problem will not go away. A major earthquake in California is imminent. Personally and professionally, I believe the best defense is to do BOTH retrofit your home to modern standards AND get an earthquake policy with the maximum deductible you can afford.
A little preparation on your part can potentially prevent a poverty-stricken retirement. Consider all of your options to protect your nest egg.
Notes: Talk to a licensed contractor in your state if you are considering doing earthquake renovations on your home. Even if you’re considering adding, changing, or terminating an insurance policy, always speak with a licensed agent in your state or jurisdiction. Insurance rules, regulations, and forms of coverage may vary from state to state.
Johnson is an independent insurance broker based in Marin County, California. He is authorized to write and service insurance solely in the State of California. CA License 0H11625.