Most Californians Are Financially Unprepared For An Earthquake

Though the memories Northridge earthquake are permanently etched in Californians' minds, few are taking steps to protect themselves from such devastation. The Northridge quake caused more than $15 billion in insured losses, but less than 20 percent of homeowners today carry earthquake insurance to protect themselves against future losses.

Earthquake insurance premiums average $600-to-$800 a year and carry a 10-to-15 percent deductible.

"Earthquakes present a huge risk to California homeowners and those that don't prepare financially are essentially rolling the dice with the biggest investment of their lives - gambling that it won't happen to them," said Candysse Miller, executive director of the Insurance Information Network of California.

Homeowners who choose not to purchase earthquake insurance often take few measures to mitigate earthquake losses. Most experts recommend that uninsured homeowners take steps to retrofit their home or maintain a savings account in case disaster strikes. While consumers are unprepared because they feel it "won't happen to them," others believe that the government would step in to pick up the pieces of a massive quake or they would just walk away from their dmaged home. However, such decisions could have serious consequences.

Federal disaster loans are not available for all disasters and even then, federal aid comes in the form of low-interest loans that must be paid back. Walking away from the home and declaring bankruptcy means paying financially and emotionally for years. The "black eye" of bankruptcy remains on a credit report for 10 years and will affect future purchases and investments.

As the value of California real estate skyrockets, so does the equity that consumers have in their homes. Many homeowners underestimate the amount of equity they have in their home and the true value of what they have to protect.

IINC offers the following tips to homeowners on preparing financially for an earthquake:

• Shop around for insurance. Some private insurance companies offer earthquake insurance, allowing consumers to compare options and prices. Also, the CEA now offers supplemental policies allowing consumers to purchase additional contents coverage or lower their deductible.
• Look into retrofitting your home. In some cases, taking simple steps such as bolting wood-frame homes to the foundation could dramatically cut the risk of earthquake damage and even reduce earthquake insurance premiums.
• Evaluate your finances. Take another look at the equity you have in your home, it may be more than you realize, and then decide how you want to protect your investment.