Here's an eye-opener ...Tuesday, April 11, 2006By Jim ChristieReuters News ServiceSAN FRANCISCO -- With the 1906 San Francisco earthquake very much in the public eye ahead of its 100th anniversary next week, interest in insurance against future quakes remains remote for many Californian homeowners.Just 14 percent of homeowners in the temblor-prone state have earthquake insurance, according to state officials, creating considerable financial uncertainty for a state where future catastrophe waits just beneath the Earth's surface."The vast majority of people know an earthquake is likely to occur but willingly turn down the coverage," said Robert Hartwig, chief economist for the Insurance Information Institute, a trade group for insurers. "They're playing Russian roulette."While insurance carriers must offer California homeowners earthquake insurance and the insurer-funded California Earthquake Authority also offers it, the state's households overwhelmingly prefer to go without -- despite dire warnings about the potential for earthquakes.Even top earthquake experts are among the earthquake insurance have-nots.University of California at Berkeley seismologist Robert Uhrhammer is retrofitting his wood-frame home, which is about two miles from a fault capable of magnitude 7 earthquakes, to bring it up to current earthquake codes. Yet he opted against earthquake insurance."I expect it would fare well even through the strongest shaking, with little or no structural damage," he said.Such thinking calculates that wood-frame homes withstand earthquakes fairly well and mitigating financial risks to them may be best accomplished with measures other than insurance.Others say it's better to be financially prepared for the worst, a potential earthquake known simply as "The Big One.""People living in California know they are living in earthquake country but I'm not sure they know the risk in a quantifiable way," said Jayanta Guin, vice president for research and modeling for risk-modeler AIR Worldwide Corp.Seismologists estimate the 1906 earthquake that struck San Francisco was a magnitude-7.8, marking a major temblor. The U.S. Geologic Survey estimates a 62 percent probability of a magnitude-6.7 or greater earthquake capable of causing widespread damage striking the San Francisco area before 2032.Guin's company estimates the current value of residential and commercial property in the "damage footprint" of the 1906 earthquake at more then $1.6 trillion. Were a temblor similar to the 1906 earthquake to strike the area there would be estimated insured property losses of $80 billion and total property losses would top $300 billion, according to AIR.The numbers argue for Californians who live along or near earthquake faults to buy insurance to protect against the catastrophic loss of property, said Nancy Kincaid, a spokeswoman for the California Earthquake Authority.She stresses the word "catastrophic" because the cost of repairing substantive earthquake damage to a house and maintaining mortgage payments could wipe out many homeowners."Most consumers don't have a good reality check on how they would recover," Kincaid said, noting homeowners may buy the authority's catastrophic insurance for between $200 and $2,000 a year depending on where they live and the type of home.Californians foregoing earthquake insurance, however, may be making an informed choice because serious earthquakes are rare and deductibles on the policies are high -- 10 percent to 15 percent of a home's insured value -- so cosmetic damage likely would not be compensated. Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula
