Jonathan Edewards

Southern California Earthquake Risk Increases; Most Homeowners Uninsured

A sudden flurry of minor earthquakes at the tip of the San Andreas Fault has seismologists worried that the “Big One” could be triggered, the Los Angeles Times reports. In any given week, the normal risk of a major quake that would cause homeowners and commercial property owners in Greater Los Angeles to lose their properties is about 1 in 6,000, scientists estimate. This week’s swarm of quakes dramatically increases the risk of a major (7.0+) quake occurring within 7 days to as low as 1 chance in 100. Read the Los Angeles Times article here.

 

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Despite the annual warning notices that insurance companies mail to homeowners, most property owners have let their earthquake insurance policies lapse or have never purchased coverage, and would lose their home or business if an earthquake levels it. For the past decade, there have been few options to purchase earthquake insurance, and policies came with such high deductibles (15%) that homeowners were discouraged and opted to forgo coverage and take the risk.

In recent months, new earthquake insurance policies have become available with improved coverage.

Under the previous offerings, a 15% deductible meant that a home insured for $500,000 had to sustain at least $75,000 in damage for the policy to pay a claim; faced with the thought of having to pay the first 15% of their home’s insured value, many homeowner preferred to ignore the risk altogether.

(Notice that fine point: the earthquake deductible applies to a % of the insured value, not a % of the damage.) For example, if an earthquake hits a home insured for $500,000, and the earthquake causes minor cracking of the foundation and walls, and also results in water damage from a burst pipe, and that damage costs $100,000 to repair, the claim would be settled like this:

$100,000 repair cost – (15% x $500,000 insured value) = $25,000 claim payout.

New Earthquake Insurance Policies are closing the gaps in coverage that older policies contain.

The new earthquake insurance policies now offer lower deductible options: 5% or 10%. That means that homeowners can sleep better at night! It’s much more comforting to know that your earthquake insurance policy will pay the cost to rebuild or repair your house in the event of an earthquake without having to take a out a loan to cover the policy’s deductible.

In addition, some of the new earthquake policies now include substantial coverage for swimming pools, walkways, driveways, patios, and retaining walls. Most earthquake policies limit coverage on those items to just $3,000 or so. Clearly, $3,000 would not be sufficient to replace a swimming pool or a lot of paving/decking. The new policy options can take care of those items, too, if you are careful to purchase a policy that specifically provides that coverage.

For advice and help obtaining earthquake coverage for yourself or your business, contact Jonathan Edewards at Citrust Insurance at 626-765-4495 or GetHelp@Edewards.com.

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For advice and help obtaining earthquake coverage for yourself or your business, contact Jonathan Edewards at Citrust Insurance at 626-765-4495 or GetHelp@Edewards.com.

 

Santa Ana Winds Topple Pasadena Trees, Insurance Claims Result

How a personal insurance agent can help you recover from a personal or commercial loss.

The fiercest winds in 50 years caused a lot of damage in Pasadena and Los Angeles on Wednesday.

This unlucky Volvo was crushed by a toppled tree

On the street where I live, I saw at least 2 cars that had been crushed by huge tree limbs that fell on them, smashing the roof and windows.  “Comprehensive” auto insurance coverage, also known as “other-than-collision,” is devised to help an insured recover from just such a loss.  It also provides coverage from theft. Home owners and business owners whose awnings blew away, or whose roofs were damaged, or windows broken, or who lost business due to a power outage, should be able to recover the loss from their property insurance. Businessowners’ policies even typically provide some coverage for plants, shrubs, and trees (usually limited to $2,500 or less per plant), and may be able to include the cost to replace the trees that were torn from the ground in their claim. The fastest and easiest way to report a claim is to call the insurance company claims hotline directly.  My Safeco Insurance clients should call 800-332-3226. Insureds who have bypassed an agent by purchasing insurance online, or directly from the insurance company, must call their claims hotline, and have no other alternative. However, an insurance agent provides a second alternative to contacting the insurance company directly and dealing with the claims hotline.  My clients know that they can always call me for assistance with the claim. Having an agent is valuable for (at least) two reasons: an agent has a personal, continual relationship with you and should be familiar with your special situation already.  Less time is spent gathering information and correcting misunderstandings.  Secondly, an agent is familiar with the “inside contacts” within an insurance company, and can help a client “go up the ladder” if a problem arises and the claim is not handled to the client’s satisfaction. For example, I recently assisted a business client who had experienced an costly auto accident.  The dealership, where the Mercedes had been taken for repair, was backed up and not cooperating with the claims department.  After several non-responses, and an estimate that was close to the car’s value, the insurance company moved to declare the vehicle a total loss, rather than proceeding with repair.  The insured preferred to repair the vehicle. I intervened with both the dealership and the claims department, pointing out to the dealership that they were about to lose the repair business unless they offered better terms to the insurance company.  On the claims side, I contacted the manager of the claims department, reviewed the valuation report, noted that the vehicle’s condition was better than the report indicated, and thus a total loss would require a larger settlement than previously thought.  The vehicle was repaired, and my client was pleased. The insurance companies that I represent have excellent, fast, and friendly claim departments, and claims are handled to the customer’s satisfaction the first time around, which is why I recommend that clients make their initial report directly to the insurance company. But if the case goes awry, I’m available to assist. Pasadena will be green again, and the residents and businesses who are properly insured will be able to recover from their loss relatively painlessly.  That’s what insurance–and an insurance agent–is for.

Making your home earthquake safe – Retrofitting

Earthquake Insurance for homes and condos typically carries a requirement that the dwelling be bolted to the foundation.  Many older homes were not built this way and require a specialized contractor to retrofit a home for earthquake safety. A recent article in the Pasadena Star News interviews one such contractor:

Highlights:

  • Typical cost to retrofit a home for earthquake safety is: $4,000
  • Many homes in San Marino and Beverly Hills already are bolted, but most other areas are not.
  • Bolts should be space 6ft apart for one-story dwellings, and 4ft apart for 2 story dwellings.
  • Foundations made of brick or river rock (as opposed to concrete) may require a new secondary foundation, which costs much more, ~$25,000.

Greg Sylvis retrofits homes to make them earthquake safe – SGVTribune.com.

Earthquake Insurance can be quite costly, often equal to or more than the homeowners policy, but some rates are decreasing.

The California Earthquake Authority (CEA) has announced that its statewide rates will decrease on average 12.5%, effective Jan. 1, 2012, for new and renewal CEA policies. 

The California Earthquake Authority (CEA) is a publicly managed, largely privately funded organization that provides catastrophic residential earthquake insurance through private insurance companies, including to Safeco’s property insurance customers.

There are other alternatives to the CEA, including GeoVera Insurance Company, Travelers Insurance, and CIG Insurance companies, and rates vary widely between companies depending on the specific address of each home.

Does your business have an Earthquake Plan?

The Big One hits.   Power is out.   Roads are blocked.   Supplies are limited. 

How fast can your business get back on its feet? 

Can you be better prepared than your competitors?

Could you gain new customers by being ready when other businesses are not?

 

Los Angeles and Orange County California Fault Map

Fault Lines in Southern California

Here are some strategies for preparing for the earthquake, before it hits.

  • Establish a Business Continuity Management Plan (BCM) that takes crisis management, and business recovery, into consideration. If a BCM is already in place, review and update it as needed for earthquake readiness.
  • Consider where your employees live and discuss plans for continuing work.  How will they get to work if routes are blocked?  How will you communicate with them if cell phones & telephones & internet connections are down?  Can you establish and agree upon predetermined procedures that can work around such complications?
  • Brace all tall shelves and cabinets, tall machinery and equipment, or any top-heavy objects that could topple.
  • Brace and support overhead-mounted fixtures, suspended ceilings, piping, heaters, and other overhead-mounted devices.
  • Plan for continuous plant security.  How will you protect your property from looters?
  • Provide auxiliary equipment and energy supplies for critical services such as communications and lighting.
  • Provide adequate support for mainframe computers.  Back up your data at an off-site location.
  • Provide flexible fuel supply connectors to avoid ruptured gas lines, etc.
  • Bolt down and secure fuel-fired appliances, along with any pressurized gas cylinders.

    Insufficiently secured gas cylinders

    Will these gas cylinders break loose of their chains and roll?

  • Provide isolation valves for piping systems.
  • Provide alternate energy sources for vital equipment and services.
  • Plan for customer and client awareness and communications.
  • Provide an alert and warning system for all personnel on the premises.
  • Designate a BCM Coordinator and a BCM Team. Assign responsibility to specific employees for advance arrangements to initiate the plan.
  • Conduct a business impact analysis and risk assessment of the facility and its operations. Upgrade deficient areas.
  • Upgrade the facility to current earthquake codes.
  • Inspect tanks, stacks, signs, and chimneys for deterioration and bracing. Repair and strengthen as necessary.
  • Identify and designate safe shelter areas in the structures.
  • Identify and designate at least two evacuation routes for all areas.

 Next up: What to do AFTER the earthquake hits

Catastrophe in Japan raises Earthquake, Flood Concerns in California

As Californians watch the news coverage and YouTube videos of the devastating earthquake and tsunami that occurred in Japan, many have started to wonder, “Are we vulnerable, too?”

The geology off the coast of Japan is very different from the California coast, so an exact repeat isn’t likely.  However, California is certainly an earthquake zone, and much of Southern California and Central California is vulnerable to flooding.

The fact is: almost all property insurance excludes coverage for earthquake and flood.  That means that your homeowners or businessowners insurance policy will not reimburse you if an earthquake or flood (including tsunami) causes damage to your home or business.

And that exclusion extends to resultant damage, too.  For example, if an earthquake causes your property’s gas lines to rupture, or causes an overload to your electrical system, which sparks a fire, the resulting damage–burned buildings and burned contents–will not be covered by insurance.  The cause of loss in that example is earthquake.  The earthquake caused the fire, and the fire caused the damage to property. Even though fire–by itself–is normally covered, the fire was caused by the earthquake, and therefore all the damage falls under the earthquake exclusion.

Ditto for resultant damage from a flood.

Earthquake insurance can be purchased as a separate insurance policy in addition to your homeowners or businessowners policy.  Although earthquake insurance is very expensive (expect to pay about as much as your standard property insurance policy, or more), and typically will carry a high deductible, an earthquake insurance policy will offer you the reassurance that you won’t lose everything when the “Big One” hits.

Flood insurance, on the other hand, is very inexpensive, and every property owner should purchase a policy, even if the risk looks minimal.  The fact is that every property is located in some kind of a flood zone — it is just a question of whether it is a in a moderate-to-low zone or high risk zone.  About 25% of all flood insurance claims are from moderate-to-low risk areas.

Many property owners believe that in the event of an earthquake or flood, the government will step in and provide disaster assistance.  This is true, but only if the President declares a disaster, and even so, Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, the monthly payment would be around $240 a month ($2,880 per year) for 30 years, in addition to the mortgage loan that is still owed on the damaged property.

Insurance can be purchased quite easily, and it’s the best way to protect the time, energy, and money that you’ve invested in your property.