Sponsor Message:
Non Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
85% Of CA Homeowners Have No Earthquake Ins.  
User currently offlinePope From , joined Dec 1969, posts, RR:
Posted (9 years 1 month 4 days 3 hours ago) and read 1416 times:

http://www.gainesville.com/apps/pbcs...1117/BUSINESS/51116085/1081/news02

I find the statistic provided in this article staggering. 85% of CA homeowners have no earthquake insurance!

I'm sure that when the big one strikes they'll expect the rest of us to foot the bill for their decision to not buy the insurance that is available. I'm sick and tired of people choosing to spend their money today, ignore foreseeable risks, and then expect everyone else to pay for their stupidity later.

This is absolutely amazing.

28 replies: All unread, showing first 25:
 
User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 1, posted (9 years 1 month 4 days 3 hours ago) and read 1407 times:

You make a good point. But look at it from our point of view. If everyone in the state, or even half, bought earthquake insurance, and suddenly an 8.0 or higher strikes downtown LA and levels every building for a 30 mile radius and severely damages every other one for an additional 30, think of how MANY that would be. Think of the costs. There is no company in the world that could, overnight, come up with enough money to cover losses of that magnitude. The insurance companies will simply file bankruptcy or deny claims based on a small technicality and walk away, leaving us (and the rest of you) to pay for it.

So what's the point of paying the premiums year after year when we know that, should we ever actually need it, most likely we will get nothing?


User currently offlineStall From Switzerland, joined Apr 2004, 257 posts, RR: 0
Reply 2, posted (9 years 1 month 4 days 3 hours ago) and read 1407 times:

Howmuch does it cost to assure a house for earthquake insurance ? Is it possible that's so costly that the majority of the people simply can't pay ?


Flying is fun
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 3, posted (9 years 1 month 4 days 3 hours ago) and read 1402 times:

Quoting Matt D (Reply 1):
You make a good point. But look at it from our point of view. If everyone in the state, or even half, bought earthquake insurance, and suddenly an 8.0 or higher strikes downtown LA and levels every building for a 30 mile radius and severely damages every other one for an additional 30, think of how MANY that would be. Think of the costs. There is no company in the world that could, overnight, come up with enough money to cover losses of that magnitude. The insurance companies will simply file bankruptcy or deny claims based on a small technicality and walk away, leaving us (and the rest of you) to pay for it.

Matt that's the responsibility of your state's insurance commissioner to only license insurance companies that are financially capable of sustaining losses they are insuring.

Under your position, I have to pay for your house. How's that any more fair? I absolutely love California (Hermosa and Redondo Beach and the strand are my absolute favorite places to relax). I would love to move their tomorrow if I could afford to live their, but I can't so I don't. How is it fair that the people living with those breath taking views should turn to me and ask me who lives in the middle of North Central Florida, to pay for their multimillion dollar houses.

At some point personal responsibility needs to take over, if you can't afford to bear the risk, then don't live there, be it CA, New Orleans or beach front in Florida. Once again, your decision shouldn't be made by reaching into my wallet.


User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 4, posted (9 years 1 month 4 days 3 hours ago) and read 1397 times:

Bro, you're preaching to the choir here. I agree with you 100%. It's NOT fair and it's not right. Do you honestly think that, given the political climate of the state that everything is on the up-and-up? Don't even TRY and tell me that there already isn't some state and insurance bedfellowing going on. Connect the dots between speeding tickets, red light cameras, insurance premium rates, city/state "budget crunches", and leftist entitlement politics.

I would stake my own life on the idea that says if a multi-trillion disaster were to hit the state, the state will look the other way when ot comes to insurance companies fleeing the state and/or performing wholesale claim refusals, thus ceding full control to the state. This, of course after a couple of plain brown paper bags change hands.

And now seriously...why do you want to live here?

I mean yeah, we have some nice beaches and definitely a nice climate. But unless you either won the lottery, or make your living as a surfer, most of us actually have to travel somewhere to work for a living. You're not going to be on the beach every day. And never mind the fact that nearly all of the beaches from Ventura to San Diego get closed down for "hazardous bacteria levels" or some other kind of ill at least once a year.

If you don't mind paying half a mil for a house that would, in the midwest cost about one fifth as much, go to a restauraunt any time of day, any day of the week-and have to wait in line, spend 30 minutes waiting at red lights to travel 5 miles, or move along at about 5 mph on the freeways day after day in exchange for some nice weather, then come on over....be my guest.

Todays California is not the same one that the Beach Boys sang about.

Too bad the rest of the country and world hasn't figured that out yet.


User currently offlineSlamClick From United States of America, joined Nov 2003, 10062 posts, RR: 68
Reply 5, posted (9 years 1 month 4 days 3 hours ago) and read 1396 times:

Quoting Matt D (Reply 1):
The insurance companies will simply file bankruptcy or deny claims based on a small technicality and walk away, leaving us (and the rest of you) to pay for it.

This would not be necessary. There are already Federal Regulations in place for them to default on such widescale claims. The viability of very large businesses and their effects on the economy have always been deemed more important than your losses.

It is rather like the FDIC that "guarantees" your bank deposits. How much money do you think they really have on hand? The average person would, in the short-term get only pennies for their entire bank account if there was a large enough run on most of the banks in the country. Maybe if the economy eventually fully recovered you might get most of it back, but there are no giant vaults full of cash for them to FedEx to your house.



Happiness is not seeing another trite Ste. Maarten photo all week long.
User currently offlineUPS707 From United States of America, joined Sep 2004, 360 posts, RR: 0
Reply 6, posted (9 years 1 month 4 days 2 hours ago) and read 1387 times:

Quoting Pope (Thread starter):
I'm sick and tired of people choosing to spend their money today, ignore foreseeable risks, and then expect everyone else to pay for their stupidity later.

As a Californian who doesn't have Earthquake insurance, I have to argue
your "Stupidity" comment. If the entire state isn't at risk for Earthquakes, why should the entire state be expected to carry Earthquake coverage. The main faults cover the LA Area and the Bay Area which granted are a huge chunk of population, but the Central Valley is not at threat from Earthquakes and I don't expect to pay for coverage I don't need.

Explain to me how this is any different from Flood Insurance which alot of people also don't carry. I do carry it because I know that my property is somewhat low and could some day be at risk, so I see the need, but when there hasn't been an earthquake that has affected this area in the 35 years that I have been here, why waste the money?

So going back to your statement, I agree that people need to have coverage for the things they are at risk for if they expect to be compensated, but forced coverage for something that doesn't affect them is not the answer. However, if it is, why stop at the state level..... why don't we make the entire country carry Earthquake insurance and truly level out the costs?


User currently offlineWellHung From , joined Dec 1969, posts, RR:
Reply 7, posted (9 years 1 month 4 days 2 hours ago) and read 1377 times:

It makes sense NOT to have earthquake insurance for most people. Deductibles are usually 15-20%, so the higher the policy, the higher the deductible. Add to that the premiums that can be triple the regular homeowner's premiums. And if you have little or no equity in the property, why would you get insurance to protect the bank? If you leverage your property, you can just walk away if it is destroyed. Combine smart investing, strict California building codes and the low risk of a catastrophic earthquake in any specific area at any time and you're better off without.

User currently offlineSuperfly From Thailand, joined May 2000, 40066 posts, RR: 74
Reply 8, posted (9 years 1 month 4 days 2 hours ago) and read 1373 times:

Quoting UPS707 (Reply 6):
but the Central Valley is not at threat from Earthquakes

 redflag 

Remember the major earthquake that hit Coalinga in 1983?
Pasa Robles last year?



Bring back the Concorde
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 9, posted (9 years 1 month 4 days 1 hour ago) and read 1364 times:

Quoting UPS707 (Reply 6):
I have to argue
your "Stupidity" comment. If the entire state isn't at risk for Earthquakes, why should the entire state be expected to carry Earthquake coverage.

Excellent point. Perhaps I painted my comments with too broad a stroke.

Quoting UPS707 (Reply 6):
and I don't expect to pay for coverage I don't need.

Ok but then, if you're wrong, please don't advocate making everyone else pay to help you rebuild.


User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 10, posted (9 years 1 month 4 days 1 hour ago) and read 1361 times:

Quoting WellHung (Reply 7):
why would you get insurance to protect the bank? If you leverage your property, you can just walk away if it is destroyed.

You're not protecting the bank, you're protecting your financial future. Even if you owe more than the property is worth, you remain financially liable to the bank. You'll end up having to declare bankruptcy to discharge that liability.

If you are dumb enough to overleverage yourself, being more fiscally irresponsible isn't the right answer. A 20% haircut is better than a 100% loss.


User currently offlineTheSonntag From Germany, joined Jun 2005, 3763 posts, RR: 29
Reply 11, posted (9 years 1 month 4 days 1 hour ago) and read 1358 times:

Is it possible to sign earthquake insurances in high-risk areas? I mean, if the risk is too high, nobody insures, so it is either extremely expensive or impossible to insure!

User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 12, posted (9 years 1 month 4 days ago) and read 1351 times:

Superfly:

When they say Central CA, they are probably referring to the San Joaquin Valley (Hwy 99 corridor), Bakersfield-Tulare-Visalia-Fresno-Madera-Merced-Stockton-Sacramento areas, which I have to agree....have never appeared as at high risk for earthquakes.

Unfortunately the cities you are referring to are often forgotten....like you said....Paso Robles, which is just a stones throw away from the earthquake capitol of the world-Parkfield.

But thoser cities, while technically in the middle of the state, are more towards the coast along the very shaky Coast Ranges hills-and well away from the SR 99 cities.


User currently offlineSuperfly From Thailand, joined May 2000, 40066 posts, RR: 74
Reply 13, posted (9 years 1 month 4 days ago) and read 1346 times:

Matt D:
I gotcha. Technically Coalinga is Central Vally but on I-5 and no one lives there other than cows. Pasa Robles is in the shakey Coastal Ranges.


Question:
If a landlord doesn't have earthquake insurance but the tenant has renters insurance, what get covered and what does not?



Bring back the Concorde
User currently offlineWellHung From , joined Dec 1969, posts, RR:
Reply 14, posted (9 years 1 month 4 days ago) and read 1345 times:

Quoting Pope (Reply 10):
You're not protecting the bank, you're protecting your financial future. Even if you owe more than the property is worth, you remain financially liable to the bank. You'll end up having to declare bankruptcy to discharge that liability.

If you are dumb enough to overleverage yourself, being more fiscally irresponsible isn't the right answer. A 20% haircut is better than a 100% loss.

There is usually no such thing as 'medium' damage from an earthquake. Either is minor damage, which you would pay the majority (if not all) of through the deductible or it's a total loss. This is what the insurance company is banking on, which is why deductibles are so high. And basic policies only cover like $5000 of posessions and exclude pools, decks, etc. So add those costs to your deductible. And how about the time when your house is being repaired? Sure, the insurance will cover some of the costs, but your delusional if you think you can live on that money. And many people have to take loans out to even pay the deductible!

And you don't have to declare bankruptcy. You can just let the bank forclose on what would be a pile of rubble anyway. If you put the numbers together, with all loan programs available to people with poor credit, bankruptcy, forclosure, etc., you are financially better off without the insurance. Keeping your house leveraged is not preaching financial irresponsibility if you know what you are doing. It is smart investing. There's a difference between having an interest-only ARM for 95% ltv and a 1st mortgage for 60% and a HELOC you have drawn from and invested covering the other 40%.

Sure, the insurance would be the better deal for the uninformed homebuyer, but the easiest route isn't always the best. The only thing you're really protecting yourself from is the potential for forclosure should you be one of the extremely unlucky people who has their home destroyed. And any additional money you are forced to spend because of higher interest rates for the next 7 years will no way compare to the costs and frustration of paying the deductible, dealing with the insurance company, waiting for your house to be rebuilt and whatever else.

You take the money from the 40% HELOC, liquify it and move on.


User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 15, posted (9 years 1 month 3 days 22 hours ago) and read 1327 times:

Quoting WellHung (Reply 14):
You can just let the bank forclose on what would be a pile of rubble anyway.

the foreclosure doesn't discharge the debt. You'd still be liable for, and the creditor could attach your other assets/future wages until the debt was either satisfied or discharged in bankruptcy.

Quoting WellHung (Reply 14):
Keeping your house leveraged is not preaching financial irresponsibility if you know what you are doing. It is smart investing. There's a difference between having an interest-only ARM for 95% ltv and a 1st mortgage for 60% and a HELOC you have drawn from and invested covering the other 40%.

Now what % of people who are actually leveraged this high are actually investing cash they've taken out? The zero down loans or 95% LTV structures out there are being pitched to people in order to allow them to buy houses not invest the equity they've got in them. I would venture to say that most people that are this leverage are living near to or at a paycheck to paycheck existence, though clearly their are a small minority that aren't.

I have a friend who is a neurosurgeon earning $450,000 a year that has plastic lawn furniture in his house because he can't cover the mortgage payments on his $1M+ house . Clearly he's not a stupid person, just financially irresponsible.


User currently offlineWellHung From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 1 month 3 days 22 hours ago) and read 1322 times:

Quoting Pope (Reply 15):
the foreclosure doesn't discharge the debt. You'd still be liable for, and the creditor could attach your other assets/future wages until the debt was either satisfied or discharged in bankruptcy.

So if a property is sold in foreclosure for the exact amount owed, what is the bank going to come collecting for? And since the land makes up an overwhelming percentage of the property's value in earthquake-prone places like LA and SF, a destroyed home won't decrease the value as much as one would think.

Quoting Pope (Reply 15):
Now what % of people who are actually leveraged this high are actually investing cash they've taken out?

I don't care. Which is why I said this is not for the uninformed homeowner. Just because a lot of people don't do it doesn't mean it's not the best thing to do. Just because your neurosurgeon friend may be typical of the US homebuyer doesn't mean there are not people who actually know what they're doing.


User currently offlineLehpron From United States of America, joined Jul 2001, 7028 posts, RR: 21
Reply 17, posted (9 years 1 month 3 days 22 hours ago) and read 1313 times:

I am going to bet most of those are from San Diego County, there is usually no weather occuring there (no sun shine is not weather, that's default) and we only get earthquake shock waves from giant ones up north!

Quoting Pope (Thread starter):
I'm sick and tired of people choosing to spend their money today, ignore foreseeable risks, and then expect everyone else to pay for their stupidity later.

Uh, to not spend money is not helping the economy. I think most people, due to the sheer number of non-college attendees, do not understand the science of earthquakes and are thus ignorant to it. They also cry bloody marry when something goes wrong...we're all stupid at some point.



The meaning of life is curiosity; we were put on this planet to explore opportunities.
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 18, posted (9 years 1 month 3 days 21 hours ago) and read 1309 times:

Quoting WellHung (Reply 16):
So if a property is sold in foreclosure for the exact amount owed, what is the bank going to come collecting for?

You're comparing apple and oranges. The pre-disaster value of land to it's post-disaster value. I don't think people will pay premiums to live in the middle of a disaster area. Therefore, the premise that the property will be sold for its debt is incorrect.

Add to that the fact that even if the building makes up only 1/4 of a $400,000 piece of real estate, the owner is still on the hook for $100,000 and I think you'll see that it's a big number. How many people could afford to pay down a $100,000 debt?

Quoting WellHung (Reply 16):
Just because your neurosurgeon friend may be typical of the US homebuyer doesn't mean there are not people who actually know what they're doing.

Agreed. But if we're talking in generalities, I think it's a safe statement to make that being overleveraged for the average Joe is a bad situation to be in.


User currently offlineUPS707 From United States of America, joined Sep 2004, 360 posts, RR: 0
Reply 19, posted (9 years 1 month 3 days 12 hours ago) and read 1297 times:

Quoting Pope (Reply 9):
Ok but then, if you're wrong, please don't advocate making everyone else pay to help you rebuild.

This is where I agree with you, I choose not to carry Equake insurance, and if it ever does happen, any financial loss will be entirely my own fault. This is why I mentioned I carry flood insurance which is a disaster I do have a chance of having a loss from. However, this goes beyond earthquake or any other type of insurance, it's about taking responsibility for your own actions which much of society appears to have forgotten how to do. If you choose to do something (or not do it), accept any loss or inconvenience from your decision and get on with your life.... as you said, don't expect someone else to cover for your mistakes.

Quoting Matt D (Reply 12):
Superfly:

When they say Central CA, they are probably referring to the San Joaquin Valley (Hwy 99 corridor), Bakersfield-Tulare-Visalia-Fresno-Madera-Merced-Stockton-Sacramento areas, which I have to agree....have never appeared as at high risk for earthquakes.

Unfortunately the cities you are referring to are often forgotten....like you said....Paso Robles, which is just a stones throw away from the earthquake capitol of the world-Parkfield.

But thoser cities, while technically in the middle of the state, are more towards the coast along the very shaky Coast Ranges hills-and well away from the SR 99 cities.

Thanks for the clarification... that is exactly what I was referring to. Living in Sac, Paso Robles etc is Central Coast to me and far enough away that anything going on there isn't a threat to me.


User currently offlineJwenting From Netherlands, joined Apr 2001, 10213 posts, RR: 19
Reply 20, posted (9 years 1 month 3 days 2 hours ago) and read 1281 times:

Typical clause in almost any insurance policy excludes damages due to
1) war
2) terrorism
3) natural disaster

Haven't seen earthquake insurance policies (we don't get quakes here) but #3 would make the entire policy useless.

Much like the camera insurance policies I HAVE seen that exclude theft or damage is the camera is actually in use or the case it's stored in is recognisable as containing valuables.



I wish I were flying
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 21, posted (9 years 1 month 2 days 8 hours ago) and read 1254 times:

Quoting Jwenting (Reply 20):
Typical clause in almost any insurance policy excludes damages due to
1) war
2) terrorism
3) natural disaster

Maybe in the Netherlands but not in the US. For example, I live in Florida and my insurance covers hurricanes. There's a separate deductible for it, but it's covered.


User currently offlineWellHung From , joined Dec 1969, posts, RR:
Reply 22, posted (9 years 1 month ago) and read 1229 times:

Quoting Pope (Reply 18):
You're comparing apple and oranges. The pre-disaster value of land to it's post-disaster value. I don't think people will pay premiums to live in the middle of a disaster area. Therefore, the premise that the property will be sold for its debt is incorrect.

Is this based on your opinion or actual data? After the Loma Prieta earthquake, property values dropped 2% on average in the area, which may or may not have been attributed mainly to a downturn in the economy. There was little or no drop in value on average after Northridge. It's either live in the earthquake area or pick up their entire lives and move - not a viable or attractive option for most people.

Quoting Pope (Reply 18):
Add to that the fact that even if the building makes up only 1/4 of a $400,000 piece of real estate, the owner is still on the hook for $100,000 and I think you'll see that it's a big number. How many people could afford to pay down a $100,000 debt?

You haven't been paying attention.

$400,000 debt (pre-disaster)
60 LTV 1st = $240,000
40 LTV HELOC = $160,000 invested and subsequently liquidated

Post disaster property value (2% drop) = $392,000
Subtract 25% for destroyed home = $294,000 land value

Land sells for $294,000

You still own $106,000 on the HELOC. Fortunately you have $160,000 in the bank from the HELOC, assuming a zero return. You pay off the $106,000 and WALK AWAY WITH $54,000.

Contrasted to the homeowner who is in the hole $30,000+ for the deductible ALONE and also doesn't have a home... I know where I'd rather be.

[Edited 2005-11-22 18:24:09]

User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 23, posted (9 years 4 weeks 1 day 23 hours ago) and read 1220 times:

Quoting WellHung (Reply 22):
After the Loma Prieta earthquake, property values dropped 2% on average in the area, which may or may not have been attributed mainly to a downturn in the economy.

Your example is based on a 2% decline in values which might have been valid for that particular quake (I'll assume your figure is correct in arguendo) - but if we're talking about the "BIG ONE", where huge areas are destroyed and the infrastructure is unusable for month, the 2% figure might be way understated.

Though I don't have the figures, does anyone know what real estate prices in the devastated areas in N.O.'s have done since the storm? Perhaps this is a valid surrogate given the extent of the destruction to both the actual structure and the infrastructure involved.


User currently offlineWellHung From , joined Dec 1969, posts, RR:
Reply 24, posted (9 years 4 weeks 1 day 23 hours ago) and read 1216 times:

Quoting Pope (Reply 23):
Your example is based on a 2% decline in values which might have been valid for that particular quake (I'll assume your figure is correct in arguendo) - but if we're talking about the "BIG ONE", where huge areas are destroyed and the infrastructure is unusable for month, the 2% figure might be way understated.

In the above example, property values would have to drop nearly 25% for the homeowner to walk away with $0 in his pocket. Even if the largest possible quake hit (believed to be about 8.0 in California), values would not drop that much.

Quoting Pope (Reply 23):
Though I don't have the figures, does anyone know what real estate prices in the devastated areas in N.O.'s have done since the storm? Perhaps this is a valid surrogate given the extent of the destruction to both the actual structure and the infrastructure involved.

I think it's too early to determine. All the property records were just recently retrieved and little to no transactions have taken place since the storm hit. Anyway, NO and LA/SF are vastly different markets.


25 Pope : I'll be the first one to admit that I know very little about the CA real estate market, but in Florida, most lenders require (at least for new constr
26 WellHung : Not that I know of, but I've never built a new house here. There's a difference between overall property value fluctuation and the decline in one pro
27 GEEDO : Like the way we keep rebuilding the SouthEast? Can you find similar statistics for Floridians or Carolinans without similar catastrophe coverage?
28 Post contains images Jwenting : Since when's the Vatican in Florida? Yes, that's the situation over here and from what I see in a lot of places. Check your policies carefully, could
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
86% Of CA Homeowners Don't Have Earthquake Insuran posted Wed Mar 22 2006 21:34:06 by Tom in NO
Have No Fear: CA Porn Back In Action posted Mon May 17 2004 20:20:24 by WellHung
NYT Confirms: Dems Have No Plan For Iraq posted Mon Nov 13 2006 16:22:44 by Cfalk
Under The Weather-With What, I Have No Clue posted Mon Oct 16 2006 04:14:07 by Falcon84
In 6 Weeks I Will Have No More Dial-up posted Sun Sep 17 2006 04:55:40 by L-188
MI Gays Have No Right To Partner's Health Benefits posted Wed Apr 12 2006 23:24:10 by Dtwclipper
OK I Have No Culture - Larry The Cable Guy Rocks posted Sat Dec 10 2005 06:33:48 by Logan22L
Sign In Cafe: Children Of All Ages Have To Behave posted Tue Dec 6 2005 03:55:10 by EA CO AS
Do Brits Have No Taste Buds? My Genetic Theory posted Sun Nov 27 2005 21:11:43 by SmithAir747
What Is Up With The People Of CA (Gov Arnold) posted Thu Nov 3 2005 15:59:20 by Matt D