earthquake insurance

[joec]

Has SD ever had a truly destructive earthquake? Maybe the rates are what they are because people assume an earthquake would result in a house being totaled (like a car). I am only guessing, but in actuality, maybe only certain parts of a home will be affected and the insurance company will only spend the least amount to fix that portion. So 50k to fix over 50 years, but the damage was only 30k rather than a complete rebuild…

No idea. Considering it myself…

[carlsbadworker]

[quote=AN]Lets take your numbers then, $1k/yr for the next 50 years = $50k + $45k (15% deductible of a $300k house). That’s $95k out of pocket to to rebuild a $200k-300k house. That still seem worth it to me. Even if nothing happen until 100 years from now, you’re talking about $145k total payment to rebuild a $200k-300k house (assuming cost to rebuild won’t go up for the next 100 years). Still seem worth it to me. Am I missing something?[/quote]

You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.

[carlsbadworker]

[quote=AN]Lets take your numbers then, $1k/yr for the next 50 years = $50k + $45k (15% deductible of a $300k house). That’s $95k out of pocket to to rebuild a $200k-300k house. That still seem worth it to me. Even if nothing happen until 100 years from now, you’re talking about $145k total payment to rebuild a $200k-300k house (assuming cost to rebuild won’t go up for the next 100 years). Still seem worth it to me. Am I missing something?[/quote]

You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.

[carlsbadworker]

[quote=AN]Lets take your numbers then, $1k/yr for the next 50 years = $50k + $45k (15% deductible of a $300k house). That’s $95k out of pocket to to rebuild a $200k-300k house. That still seem worth it to me. Even if nothing happen until 100 years from now, you’re talking about $145k total payment to rebuild a $200k-300k house (assuming cost to rebuild won’t go up for the next 100 years). Still seem worth it to me. Am I missing something?[/quote]

You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.

[carlsbadworker]

[quote=AN]Lets take your numbers then, $1k/yr for the next 50 years = $50k + $45k (15% deductible of a $300k house). That’s $95k out of pocket to to rebuild a $200k-300k house. That still seem worth it to me. Even if nothing happen until 100 years from now, you’re talking about $145k total payment to rebuild a $200k-300k house (assuming cost to rebuild won’t go up for the next 100 years). Still seem worth it to me. Am I missing something?[/quote]

You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.

[carlsbadworker]

[quote=AN]Lets take your numbers then, $1k/yr for the next 50 years = $50k + $45k (15% deductible of a $300k house). That’s $95k out of pocket to to rebuild a $200k-300k house. That still seem worth it to me. Even if nothing happen until 100 years from now, you’re talking about $145k total payment to rebuild a $200k-300k house (assuming cost to rebuild won’t go up for the next 100 years). Still seem worth it to me. Am I missing something?[/quote]

You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.

[an]

[quote=carlsbadworker]
You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.[/quote]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?

[an]

[quote=carlsbadworker]
You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.[/quote]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?

[an]

[quote=carlsbadworker]
You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.[/quote]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?

[an]

[quote=carlsbadworker]
You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.[/quote]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?

[an]

[quote=carlsbadworker]
You are missing my point on “insuring for the lender.” Say if we just bought a $300K house with $60K down payment, if the house is totalled by an earthquake. I am either paying $45K out of the pocket and spend my time to repair the house or paying $60K to buy another $300K house with 20% down again, then stop paying on the original collapsed house. Wasn’t that become the lender’s problem? So basically, I pay $1K year for a possibility saving of $15K (assuming total collapse). I don’t think the risk is that high.
And if the damage is less than $45K (which is more likely, given that it is built after 2000), you just wasted $1K insurance premium.[/quote]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?

[carlsbadworker]

[quote=AN]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?[/quote] Right. I think when the equity goes up, it tilts toward buying earthquake insurance. Similarly, if the majority of your wealth is tied to the house, it is probably worthwhile to buy the earthquake insurance as well, regardless of the probability. And if you are certain that the big earthquake will happen, it is worthwhile to buy insurance as well (hence your comparison between 60K and 45K is valid). The scenario that I can give you is when it has no or small damage. Not all houses collapses in an earthquake. There are many houses that still stand after 1994 Northridge earthquake, that are within miles of the earthquake center. The total property damage from the Northridge is less than $20 billions...compared to trillions of dollar of real estate in California.

[carlsbadworker]

[quote=AN]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?[/quote] Right. I think when the equity goes up, it tilts toward buying earthquake insurance. Similarly, if the majority of your wealth is tied to the house, it is probably worthwhile to buy the earthquake insurance as well, regardless of the probability. And if you are certain that the big earthquake will happen, it is worthwhile to buy insurance as well (hence your comparison between 60K and 45K is valid). The scenario that I can give you is when it has no or small damage. Not all houses collapses in an earthquake. There are many houses that still stand after 1994 Northridge earthquake, that are within miles of the earthquake center. The total property damage from the Northridge is less than $20 billions...compared to trillions of dollar of real estate in California.

[carlsbadworker]

[quote=AN]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?[/quote] Right. I think when the equity goes up, it tilts toward buying earthquake insurance. Similarly, if the majority of your wealth is tied to the house, it is probably worthwhile to buy the earthquake insurance as well, regardless of the probability. And if you are certain that the big earthquake will happen, it is worthwhile to buy insurance as well (hence your comparison between 60K and 45K is valid). The scenario that I can give you is when it has no or small damage. Not all houses collapses in an earthquake. There are many houses that still stand after 1994 Northridge earthquake, that are within miles of the earthquake center. The total property damage from the Northridge is less than $20 billions...compared to trillions of dollar of real estate in California.

[carlsbadworker]

[quote=AN]
Now I get where you’re going with this. Lets assume that you buy the insurance and w/in a year, there’s an earthquake that total your house. You have an option of paying $46k to rebuild your $300k house, or spend $60k to buy another house. I still think $46k < $60k. However, if you down less than 20%, then it would be better to just walk away. Then in that scenario, you're right, there's no point in buying insurance. Every year that you pay into your mortgage your principle goes down, which give you more incentive to get insurance, right? Lets say you won't experience an earthquake that total your house for 10 years, you would have paid $10k in premium + $45k to rebuild (assuming cost to rebuild doesn't go up in 10 years). So, if you rebuild, you're still only out $55k. However, if you walk away, you're out $108k you've put into your house ($60k in down payment and $48k in principle) + $60k (20% down on an equivalent house, assuming housing doesn't go up in 10 years). Besides the scenario where your down payment of a new house is less than to cost of rebuilding your current house + the yearly premium, can you give me a scenario where it would make more sense to not get earthquake insurance? In the scenario you gave in your last post, $60k is still greater than $45k. Also, if I'm not mistaken, you don't have to rebuild to the exact quality. So, lets say you're covered for $300k and your house get totaled. They pay you $255k to rebuild your house. You can rebuild your house up to $255k and not have to spend a single penny out of pocket. Right?[/quote] Right. I think when the equity goes up, it tilts toward buying earthquake insurance. Similarly, if the majority of your wealth is tied to the house, it is probably worthwhile to buy the earthquake insurance as well, regardless of the probability. And if you are certain that the big earthquake will happen, it is worthwhile to buy insurance as well (hence your comparison between 60K and 45K is valid). The scenario that I can give you is when it has no or small damage. Not all houses collapses in an earthquake. There are many houses that still stand after 1994 Northridge earthquake, that are within miles of the earthquake center. The total property damage from the Northridge is less than $20 billions...compared to trillions of dollar of real estate in California.

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