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After two sizeable earthquakes book-ended the state last week, Californians got a jarring reminder of their unsettled landscape. But with roughly 12 percent of California homeowners purchasing earthquake policies, are their finances also on shaky ground?
 
In today’s financial climate, walking away from disaster losses may not be a viable solution for homeowners.

“Living in California without earthquake insurance is like going to the beach without sunscreen: You’re completely exposed and you could get burned,” said Candysse Miller, executive director of the Insurance Information Network of California.

Homeowners who forego earthquake insurance often take few measures to reduce earthquake losses. Most experts recommend that uninsured homeowners retrofit their home for seismic safety and maintain a savings account in case disaster strikes. While some consumers feel “it won’t happen to them,” others believe that they would receive government relief for disaster losses.

Federal aid is not available for all disasters and even then, it is typically available as low-interest loans that must be paid back.

Homeowners who “walk away” from damaged property may also find that current bankruptcy laws leave them in a deeper financial hole than they had expected.
 
Many homeowners make the decision to purchase earthquake insurance based on the equity they have in their homes. With California’s depressed real estate market, they may feel their equity doesn’t justify the cost of earthquake coverage. The contents of the home – often including expensive electronics, furniture and collectibles that need to be inventoried -- may also get overlooked.

IINC offers the following advice to homeowners:
 
• Evaluate your finances. Analyze your home investment and inventory your property. Be sure that you have some form of viable financial recovery plan in place whether or not it includes insurance.

• Retrofit 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 reduce insurance premiums. Smaller steps such as strapping your water heater to the wall, bracing large appliances and bookshelves and using museum wax to secure fragile collectibles can save both money and headaches.

• Shop around for insurance. Both the California Earthquake Authority and private insurers offer policies, allowing consumers to compare options and prices. Companies may offer supplemental policies to increase contents coverage or lower insurance deductibles. Talk to you insurance agent for more information.

IINC is a non-profit and non-lobbying trade association dedicated to helping the public understand insurance and manage risk. For more information, please visit www.iinc.org. IINC is also on Twitter at http://www.twitter.com/iinc and on Facebook at http://companies.to/iinc.