why in California, mortage lenders require fire insuance but not earthquake insurance

Sagar T · #1 (**permalink**) 10-11-2009, 03:05 AM

and why few insurance companies cover earthquakes and if they do, it is with unusually high premiums and co-payments

ukv · #2 (**permalink**) 10-15-2009, 03:05 AM

Well just taking a shot in the dark here, but I believe that fires are more likely to happen than earthquakes. Fires happen alto and spread so fast, so I'm not surprised that its required to have fire insurance.

gdsfgds f · #3 (**permalink**) 10-17-2009, 03:05 AM

Earthquakes are a major event that causes terrible damage to a large area. Fires rarely effect more than one building. Especially in CA, a major earthquake could cause billions in damage. What business is willing to risk this type of loss for a low premium? I know I wouldn't.

Joseph J. Jedlowski · #4 (**permalink**) 10-18-2009, 03:05 AM

Great question on the earthquake - are you sure they don't?

Most companies won't cover earthquake, because it's similar in scope to flood risks - you're not going to get ONE or TWO claims in an area, you'll get thousands, which makes it really hard to price adequately to cover your losses.

"Unusually high premiums and co pays" is relative. Here in Texas, it's not uncommon to see a 5% or even 10% wind deductible on your policy - similar to the co pays you're talking about on earthquake coverage. THAT'S because the likelihood of a loss is PRETTY HIGH.

They need to have enough premium to cover the risk in case of an even. PART of limiting the premium, is having the policy holder SHARE in the loss with a copay.