Anniversary of Northridge Quake Prompts Physical, Fiscal Preparedness

Few people can forget the devastation of the Northridge earthquake, but for some, it’s all too easy to overlook how a major earthquake can leave personal finances in shambles.

The Northridge quake caused more than $15 billion in insured losses, yet less than 15 percent of California homeowners carry earthquake insurance today. Earthquake insurance premiums average $600-to-$800 a year and carry a 10-to-15 percent deductible.

“Living in California without earthquake insurance is like going to the beach without sunscreen: You’re completely exposed and you could get burned,” said Candysse Miller, executive director of the Insurance Information Network of California.

Homeowners who decide to forego earthquake insurance nonetheless often take few measures to reduce earthquake losses. Most experts recommend that uninsured homeowners retrofit their home for seismic safety and maintain a savings account in case disaster strikes. While some consumers are unprepared because they feel it “won’t happen to them,” others believe that they would receive government relief or just walk away from their damaged home. However, such decisions could carry serious consequences.

Federal aid is not available for all disasters and even then, it is available as low-interest loans that must be paid back. Walking away from the home and declaring bankruptcy means paying financially and emotionally for years. The black eye of bankruptcy stays on a credit report for 10 years and will affect future purchases and investments.

Many homeowners make the decision to purchase earthquake insurance based on the equity they have in their homes. However, with California’s hot real estate market, homeowners may underestimate their equity. The contents of the home may also get overlooked. Many homes today have expensive electronics, furniture and collectibles that need to be inventoried in the event that they are stolen or destroyed.