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How Much Do You Know About Earthquake Insurance?

How Much Do You Know About Earthquake Insurance
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In light of the recent earthquakes that rocked our state, I’m happy to bring on Zachary Schneiderman from Schneiderman Insurance today to have him address (and shatter) three of the biggest misconceptions about earthquake insurance.

The first misconception homeowners fool themselves into believing concerns FEMA. Too often, people are under the false impression that FEMA will cover their home in the event of an earthquake. 

But here’s a little-known fact: Back in 1994 when the famous Northridge earthquake occurred, most homeowners were insured against earthquakes as part of their standard coverage. The carriers who offered it stopped including earthquake insurance shortly thereafter, which led to the birth of the California Earthquake Authority. Now, only about 10% of homeowners carry earthquake insurance.

FEMA simply doesn’t have the resources to cover every single home in a major metro area, and receiving their assistance in the aftermath of an earthquake or other disaster takes a lot of time. Another thing most people don’t know is when you do receive assistance, it’s typically in the form of a loan, which is almost like having a second mortgage for repairs.

It’s important not to rely on FEMA to save the day. You’ll be much better off if you obtain a policy you can control with an insurance carrier that’s financially stable and can process your claims in a timely manner.

“A 15% deductible might be high, but without insurance, you’re stuck with a 100% deductible.”

The second misconception pertains to something that scares a lot of homeowners: the deductible. Because of the high deductible cost associated with earthquake insurance, a number of homeowners are convinced that it’s in their financial interest to just go without insurance. 

A 15% deductible might be high, but without insurance, you’re stuck with a 100% deductible. In the case of the 15% deductible, the policy will cover 85% of your claim, and if push comes to shove, you can borrow the remaining 15% from FEMA or a bank.

The final misconception Zachary mentioned during our discussion was the common belief that earthquake insurance is covered by homeowners insurance. The truth is that homeowners insurance policies seldom include earthquake insurance, and oftentimes, they explicitly exclude it. Certain homeowners associations may cover improvements needed to repair catastrophic damage, but they won’t cover things like loss of use or damage to your contents.

Zachary urges you to speak with your insurance advisor and review your options so that you can make a well-informed decision with respect to obtaining the coverage you intend to have.

I thank Zachary for joining us to talk about this important topic today. If you have any questions related to earthquake insurance, give him a call at 818-322-4744. And if you have any real estate-related questions, you can call us at 818-396-3311. We’d be happy to help!

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