H OUSING N EWS R EPORT
May 2016
property owners in the southwest.
aim is to recover as much of your loss as possible. At the same time, your insurance company is trying to pay you as little as they can.”
In California, everyone is waiting for the seismic disaster known locally as the “Big One.” But in the real world, earthquakes happen almost annually and the costs are sizeable. The Northridge earthquake in California in 1994 caused $23.9 billion in insured losses, reports The Wall Street Journal . A 2014 earthquake in Napa, near San Francisco, cost roughly $700 million dollars. Jim Malmberg, a broker with John Hart Real Estate in Burbank, California, knows firsthand the power of earthquakes. He lost his Sherman Oaks home in the 1994 Northridge earthquake. Malmberg said homeowners should educate themselves about the intricacies of insurance policies. “The earthquake hit at 4:30 in the morning,” said Malmberg. “My home was so badly damaged that the city bulldozed it 10 days after the quake. I lived in a cantilevered home that sat on six steel and concrete columns on a hill. One column ruptured and the others were compromised. The home was leaning down the hill, and the folks that lived below us couldn’t move in until our home was demolished.”
Earthquake Insurance Rates Vary
Homeowner’s policy costs vary from region to region. Californians can expect to pay about $2,000 per year for earthquake insurance in Orange County. However, if you live in San Francisco, you will pay about $3,000 to $5,000 per year for a 1,200-square foot Bay Area home, according to the California Earthquake Authority. For Malmberg, the Big One already hit, but earthquakes are likely to pale next a bigger natural disaster problem — droughts. The on-going drought crisis in the West cost $4 billion dollars just last year, according to the 2015 Munich RE natural catastrophe report. And 2016 is the fifth consecutive year of drought for California.
Don Griffin Vice President Property Casualty Insurers Association Chicago, Illinois “ Over the last two decades, there’s been an increase in the frequency and the severity of natural disasters. Over the last two years, it’s been relatively quiet, which worries me. ”
Into the Wildfire
Wildfires are a serious risk to property and lives in every state, but some states have a higher risk for wildfires. In 2014, there were
63,212 fires in the U.S. and Puerto Rico that burned 3,595,613 million acres — roughly the size of Connecticut, according to the National Interagency Fire Center (NIFC). “Drought conditions in California over the past four years — the warmest and driest period in its recorded history — have elevated the wildfire hazards to extreme levels,” reports Munich RE. “The dry conditions fueled several large wildfires in the state during this period, but all occurred in remote, sparsely populated areas with little human habitation or property exposure. Unfortunately, this pattern would change in September 2015, when two large conflagrations — the Valley Fire and the Butte Fire — broke out near populated areas of northern California. By the time they were extinguished, the fires had become two of the most damaging on record in the state.” About 10.6 million homes, or 8 percent of the 131 million homes in the U.S., have a “very high risk” of being struck by
Malmberg said it took two years to settle his claim; for some of his neighbors it took seven years. “To be covered for earthquakes, you need a separate earthquake policy,” said Malmberg. “And for hurricanes, you need hurricane insurance. If one of these disasters befalls you and you don’t have the correct coverage, you could be responsible for 100 percent of the damage to your home.” When Malmberg filed a claim with his insurance company, he hired a public insurance adjuster and an attorney to expedite the settlement process. He said insurance companies are not a homeowner’s friend during the claims process. “The relationship between anyone who has lost or who has experienced significant damage to their property and their insurance company is adversarial in nature,” said Malmberg, who also runs GuardMyCreditFile.org, a non-profit dedicated to credit education. “If you are the person filing the claim, your
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