For many people in the state, the premiums are higher than the perception of the threat.
Just over a week ago, the Napa Valley of California was shaken by a 6.0 magnitude tremor that led to surprising amounts of damage, particularly in terms of broken bottles of alcohol, but at the same time, on the whole, homeowners and business owners still feel that earthquake insurance is too expensive to be worthwhile.
Even some of the companies most affected were not convinced that insurance coverage would be worth the price.
Despite the fact that California is among the areas of the globe that are the most prone to quakes, the premiums for earthquake insurance policies are too high for many homeowners and business owners to be able to afford. The additional cost is even harder to fit into a budget as there are other types of insurance policy that are already required. Although other areas of the country that are at risk of hurricanes may make flood coverage mandatory, those policies are considerably less expensive than protection against quakes in this state.
Only 6 percent of the residents of Napa carried earthquake insurance before the quake two Sundays ago.
That earthquake was the largest one to strike the San Francisco Bay area in a quarter of the century, and was the first major tremor to hit the state in twenty years. That said, as is the case even following a minor quake, this has sparked discussions about “The Big One”, that most experts feel is a threat that could arrive at any moment. Should that actually occur, it may be taxpayers who end up having to cover a considerable amount of the damage that would be left behind.
If San Francisco were ever to experience a natural disaster event similar to the one in 1906, which is estimated to have had a magnitude of 7.8, it is believed that there would be insured losses somewhere in the neighborhood of $93 billion. This, according to data from the industry research group, the Insurance Information Institute (I.I.I.)
The institute’s president and economist, Bob Hartwig, said that with the rise of need for disaster relief, there would also be “enormous pressure” on the state and federal governments. He added “that would be an understatement.” Considering the low penetration of earthquake insurance, this is not difficult to believe.