House Insurance Comparison

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  Go Lakers #1 posted: 21 Apr at 5:22 pm

  Because there is a natural hazard…

  Insurance companies only insure pure risk (one that can be measured).

  An earthquake can happen at anytime, thus making the risk speculative and uninsurable.

  Also, insurance companies must avoid catastrophic losses by spreading their risk around, or not taking certain risks.

  The premium paid cannot be measured b/c the earthquake could go off tomorrow and all you made was a $1,000 payment. They would have to charge $100,000 every year…which they cannot.

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  MSAD posted: 21 Apr at 5:57 pm

  The standard homeowners policy excludes coverage for earth movement. That means, earthquake is not covered.

  Since the peril of earthquake (earth movement) is specifically excluded – there is no reason for an insurance company to not write coverage for homes in earthquake prone areas.

  However, for additional premium, you can purchase an earthquake endorsement onto your homeowners policy so that you will have coverage in the event of earth movement. The premium paid for the endorsement is directly correlated to the risk of a quake happening. Therefore, for people in very low risk areas, the coverage is very cheap. For people in high risk areas, the coverage can be quite expensive.

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  car253 posted: 21 Apr at 6:19 pm

  Earthquake insurance is a separate policy.

  In California homeowners, renters and condo unitowners can get earthquake insurance through the California Earthquake Authority.

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  mbrcatz posted: 21 Apr at 6:19 pm

  Just like flood, it’s something that’s going to affect a WHOLE BUNCH of houses all at once.

  Because of that, ONE loss, is actually going to generate millions – or billions – of dollars in losses. That would have two major effects: 1. seriously strain the capacity to pay claims (making the reserves higher, and limiting the number of policies the company can write) and 2. seriously increase the pricing of homeowners insurance. Because all those extra billions in claims, have to be paid for, from policy premiums.

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