Earthquake Insurance Question

jyl · jyl's Garage

Live in Portland OR, three story wood frame house, had house bolted to foundation, now shopping for quake insurance. Aware of large deductible (est $150K in my case). Likely earthquake here will be a very large one that devastates much of the PacNW (Seattle, Portland, etc). Looking for tips on selecting insurer that is likely to be solvent and able to pay claims. How would you go about researching this? Homeowners with State Farm now.

LWJ · 08-14-2018, 12:34 PM

Great question. I would love to know the answer as well. If a carrier has a large percentage of PNW quake business, they are toast. Or, do they piece it out into the reinsurance market?

It is carrier dependent. I work in the industry and have no idea when it comes to personal lines.

On a commercial basis, I can tell you. I will be watching to see what the brain-trust says.

My gut-instinct says go with a small regional that has a poor marketshare in the PNW. If they have a large business in the Eastern US and small business in the West, they may recover from the hit. That said, if they buy from the same reinsurers that everyone else goes to (the market for EQ reinsurance is a few players only) you really don't know.

Last thought - State Farm used to be the absolute price leader in EQ. I don't think they offer it any more out here. If you still have a policy with State Farm, I would hesitate before you cancel.

Dantilla · 08-14-2018, 12:48 PM

Wood-framed construction is the most earthquake resistant form of building.

Any quake that takes down a wood-framed house will basically mean the end of civilization in that area, and all insurance companies will be bankrupt.
Roads are torn to shreds, gas and electrical lines destroyed.

After the massive earthquake in Kobe, Japan that demolished so much, they adopted our wood-framed building codes (a friend lives there).

I had my first "fixer-upper" house during the 2001 quake. My house at the time was built to current standards, while the fixer-upper was built in 1938.
Houses weren't even bolted to the foundation until 1940. With trepidation, went to go check on the old home, not knowing what I'd find.

Nothing. Nada. No damage whatsoever.

For the great expense and huge deductibles, I go without earthquake insurance. If there was ever a need to file a claim, the insurance company is likely no better than my flattened home.

BeyGon · 08-14-2018, 01:06 PM

My brother was an agent for one of the Big ones until he retired and sold out this year. He always told me not to do it, it was a waste of my money and very good for the company. I never went farther than that.

Bill Douglas · 08-14-2018, 01:10 PM

Quote:

Originally Posted by jyl

Looking for tips on selecting insurer that is likely to be solvent and able to pay claims.

Around here their are lots of insurance companies, but they are owned or have an affiliation with a big company like Lloyd's of London. So even if they go bust Lloyd's pays out. I'm sure you guys are much the same.

Jims5543 · 08-14-2018, 01:12 PM

If it is anything like Windstorm, only consider A rated Insurance companies.

https://www.insure.com/interactive-tools/sandp/newtool1.jsp

Bugsinrugs · 08-14-2018, 01:15 PM

No quake insurance for me. If the big one knocks my house off it’s foundation I’m gonna set it on fire.

drcoastline · 01:32 PM

Insurance companies are rated by the A.M. Best Company. There are other rating companies as well but A.M. Best is the standard bearer for rating insurers. Ratings are similar to stock ratings. A++ is the highest rating for admitted carriers (State Farm, Allstate, etc.) The ratings decline from there. A+, A, B++, B+, B, etc. Never insure with a carrier below an B.

The ratings are given by financial reserves vs. risk.

It is quite likely Earthquake insurance will be excluded by the standard policy and issued through an excess/surplus lines carrier (Lloyd's, Scottsdale, Pacific, etc.) There rating shows financial strength. It can be compared to the Standard market ratings to give you a barometer as to their stability. EDIT: The excess/surplus market doesn't receive the A++, etc. rating. So you need to compare to the standard market to get an idea of strength.

drcoastline · 02:00 PM

Quote:

Originally Posted by Bill Douglas

Around here their are lots of insurance companies, but they are owned or have an affiliation with a big company like Lloyd's of London. So even if they go bust Lloyd's pays out. I'm sure you guys are much the same.

Bill, that is not correct. If a subsidiary becomes insolvent the parent company does not bail them out. They just go bankrupt. Most states have an insurance fund incase an insurer does become insolvent (bankrupt) the public has a place to get help. Look up Hurricane Andrew that hit Florida. Hundreds of insurance companies became insolvent including subsidiaries of State Farm, Allstate, Prudential, etc.

I think what you are thinking of is re-insurance where insurance companies sell off part of the risk to a second insurance company.

Also, Lloyd's isn't an insurance company as in State Farm is an insurance company. Lloyd's is made up of syndicates, essentially wealthy individuals buying the risk. They form a group under the Lloyd's name and buy your risk.

sammyg2 · 08-14-2018, 03:57 PM

If the big one hits down here and is bad enough to damage my house above the deductible, there won't be an insurance company anywhere near here still in biddness.
Even if there were, the place would be too much of a mess for a decade to rebuild.
And there won't be anyone trustworthy to rebuild it, they'll all be busy making 10 times as much as normal.

Nope, if the big one takes out my house (and I ain't underneath it) I'll move somewhere else.

BeyGon · 08-14-2018, 05:26 PM

Just had one, better call the agent.

R K T · 08-14-2018, 05:27 PM

HOLY ****...........I was just reading this and we had a pretty darn big one. at least a 3.8!

R K T · 08-14-2018, 05:27 PM

Local news just said 4.4

Evans, Marv · 08-14-2018, 10:27 PM

Yeah, 4.4 North of Julian somewhere. We had a 7.3 about 65 miles as the crow flies from here on the Mexican border maybe eight years ago. My wife & I were out in the yard at the time. It lasted long enough for us to run around to the back of the house, to see the French doors flapping back & forth. Other than that, it didn't do any damage. I was once (1951) in a 7.6 near the epicenter, and it didn't do major, stuctural damage to wood framed buildings. Brick & masonry were a different story though.

jyl · jyl's Garage

For the earthquake geeks and actuarial geeks.

See OSU Earthquake Map. O-HELP

Enter 3226 NE Glisan St Portland (not my address but quite close)

See data in pop-up report and also layers in main map (click "CSZ" icon upper-right and choose the layer you want, click the icon to right of layer for legend). There are layers for ground motion, ground deformation, etc.

So, assume house is as described in OP.

What is the max % of house replacement value would you be willing to pay annually for earthquake insurance? 0.1%? 0.05%?

Jims5543 · 08-15-2018, 02:12 PM

What kind of premiums do you pay for Earthquake Insurance?

I know my HO insurance is around $3,600 a year that includes windstorm with a pretty high deductible, like 20K and it will not cover fences sheds or screen enclosures unless you take out riders (more $$) for them.

My home is valued in the 275-325K range based on current market. We have replacement cost at around 180K with the insurance company.

MRM · 08-15-2018, 02:19 PM

I asked a friend who works in the industry and knows a lot about earthquake insurance. Their company doesn't write in Oregon, only California and Washington, so they're not an option, but here is the advice. Earthquake insurance is currently very competitive so by shopping around you should get a good price. Call your State Farm agent and ask for a referral to an insurance broker who can handle earthquake insurance. When you talk to the agent, ask for the best rate you can get from a company that is rated A.M. Best A or better. Any A rated company will have more than enough reserves to handle the big one. With the high deductibles and rates on earthquake insurance, there isn't really a problem that a big earthquake could put the company out of business if it is A rated.

So there you go. Either shop for a good broker and buy the cheapest A rated policy you can get, or self-insure and put the money you saved in premiums into the market yourself. If the big one does hit that's your loss reserve.

tabs · 02:56 PM

Simple answer....NO!

My Dad asked me that question, EQ ins or not?

I asked him how long have you lived in the house (in S CA)? answer..about 30 years.

Did an EQ ever cause any damage? answer... NO...

And there is your answer...NO

Odds are you will never have to file a claim and the deductibles are large...SO not just NO but he11 no.

tabs · 08-15-2018, 03:04 PM

Quote:

Originally Posted by MRM

I asked a friend who works in the industry and knows a lot about earthquake insurance. Their company doesn't write in Oregon, only California and Washington, so they're not an option, but here is the advice. Earthquake insurance is currently very competitive so by shopping around you should get a good price. Call your State Farm agent and ask for a referral to an insurance broker who can handle earthquake insurance. When you talk to the agent, ask for the best rate you can get from a company that is rated A.M. Best A or better. Any A rated company will have more than enough reserves to handle the big one. With the high deductibles and rates on earthquake insurance, there isn't really a problem that a big earthquake could put the company out of business if it is A rated.

So there you go. Either shop for a good broker and buy the cheapest A rated policy you can get, or self-insure and put the money you saved in premiums into the market yourself. If the big one does hit that's your loss reserve.

You mean like AIG.....

The rating don't mean shyte if the company is NOT RE-INSURING their policies...to lay off being crushed by claims from a big one. That is why AIG almost bit the big BK in 2008, they got greedy and did not re-insure their home insurance mortgage policies. When those mortgages started to default starting in 2007 AIG was on the hook to make em all good. Hoooo Haaaa.

That caused NY Govenator Patterson to beg FED Chair Bernake to save AIG...with a bail out.

legion · 08-15-2018, 03:35 PM

Quote:

Originally Posted by tabs

You mean like AIG.....

The rating don't mean shyte if the company is NOT RE-INSURING their policies...to lay off being crushed by claims from a big one. That is why AIG almost bit the big BK in 2008, they got greedy and did not re-insure their home insurance mortgage policies. When those mortgages started to default starting in 2007 AIG was on the hook to make em all good. Hoooo Haaaa.

That caused NY Govenator Patterson to beg FED Chair Bernake to save AIG...with a bail out.

It was more basic than that. They couldn't reinsure because they set aside no reserves. They thought credit default swaps were free money they'd hardly ever have to pay on.