Which deductible earthquake insurance

December 21, 2018 5:37 PM

For earthquake insurance should I get a 5, 10, 15, 20, or 25 percent deductible in California?

I'm looking at purchasing earthquake insurance for my house in California. I'm trying to decide what deductable to get. For those out there who have earthquake insurance what deductible did you choose and why? You get the best coverage with the 5% deductible but it's obviously very expensive. The 25% deductible isn't too bad price-wise but unless you have some sort of catastrophic earthquake where your house is basically destroyed the 25% deductible insurance won't even kick in till close to a hundred grand of damage depending on how much your house is worth. Any advice here is greatly appreciated.

posted by ljs30 to Home & Garden (10 answers total)

As a one-time Californian, I suggest that the risks and hazards are very different across the state. My inexpert opinion is that different strategies make sense for different regions. Consider updating with your county?
posted by SaltySalticid at 5:53 PM on December 21, 2018

Response by poster: I'm in Los Angeles county.
posted by ljs30 at 5:59 PM on December 21, 2018

How much cash do you have on hand? A $100,000 deductible is much easier to handle if you have $1M in the bank than it is if you live paycheck to paycheck. (No need to answer here, just I think that’s the most important consideration when thinking about deductibles.)
posted by mskyle at 6:00 PM on December 21, 2018 [1 favorite]

Yes, I think you have to consider what the impact of actually paying that deductible would be, should you ever have to. Get a deductible low enough that you could pay it if you had to without it being financially ruinous. "Paying it" can include taking out loans and such, it doesn't have to be cash, but you should think about what it would be like for you to actually have to cough up 25% of your home's value.
posted by Anticipation Of A New Lover's Arrival, The at 6:19 PM on December 21, 2018

The way insurance works, the company prices the premiums at more than the expected value of the payout (chance of having to pay times the amount they would pay if there is an earthquake). So, if you can afford to cover the risk of loss, on average, you will wind up better off not paying the company to take the risk for you. Insurance makes sense when the amount you would have to pay out if the bad thing happens is so big that you would rather pay the insurance company extra to avoid running the risk of a less likely but very expensive loss.

TLDR: take a big a deductible as you can afford, the insurance is priced to make it make worth your while (on average)
posted by metahawk at 6:23 PM on December 21, 2018 [2 favorites]

I'm in earthquake country and I got the lowest deductible. The reality is that if I need it, my house will be toast and I'll have A LOT of other expenses to deal with.
posted by Toddles at 8:01 PM on December 21, 2018

I feel the need to add that you're not getting insurance for something that *might* happen. You live in LA, there WILL be an earthquake - many in fact. Keep that in mind.
posted by Toddles at 9:01 PM on December 21, 2018 [2 favorites]

Depending on the age of your house and your zip code, you may be eligible for the Earthquake Brace & Bolt subsidy program. Registration will open in January; if you qualify and get your house bolted, you should be eligible for a reduction in your earthquake insurance premium.
posted by mogget at 9:17 PM on December 21, 2018 [2 favorites]

This rule applies to any insurance - get the highest deductible you can afford. I.e. you want to self insure as much as you can.
posted by JPD at 8:05 AM on December 22, 2018

I feel the need to add that you're not getting insurance for something that *might* happen. You live in LA, there WILL be an earthquake - many in fact. Keep that in mind.

This is both a correct statement and already embedded in the insurance price you pay so it doesn't change the deductible calculus.
posted by JPD at 8:06 AM on December 22, 2018