Due to the increased number of earthquakes around Salt Lake County, the topic of earthquake insurance has been off the charts.
Should I have earthquake insurance?
The short answer: It Depends!
If you have good equity in the home and your home was destroyed in an earthquake could you rebuild the home and still pay off the balance of your mortgage. If the mortgage is more than the home's value maybe it would be best to default on the mortgage and walk away. If you owned your home without a mortgage it could be better to take out a construction loan and start all over again and not pay for earthquake insurance.
Shannon, Director of Operations at Nestwell shared, "I personally have a mortgage on my primary home, I also have a very reasonable amount of equity as I have lived in the home for 16 years. With this in mind, I do have earthquake insurance on my home. The premium is about $1,000.00 a year. However, I have heard that with all this earthquake talk it will be going up to $1,500.00 a year. For me it is a value to pay $125.00 a month to have peace of mind, should the big one ever hit/ I would like to know my family would have a roof over us while we rebuild as well as the ability to not have to start over in my fifties. On the other hand, I do have investment properties that I do not have a mortgage on. Assuming that the big one hit I would prefer to take out a construction loan and rebuild. The home is in a great location on an amazing piece of dirt. It would be in my best interest to build new."
"In my experience, earthquake insurance is an expensive route to go and due to the high deductible and high monthly premium, it's typically I personally only carry it on my primary insurance and not my investment properties. I should say my wife insists I have it on our primary home. To me, the cost of the additional insurance eats up too much of the cashflow and cashflow is king." - Adam Willis, Principle Broker
How much is earthquake insurance?
As a general rule of thumb earthquake insurance doubles your annual homeowners premium. In our research deductibles are 15 to 25% of the value of the home. In Utah, that means policies range from $500 to $1000 annually.
So the moral of the story is it depends on what your tolerance for risk is and whether or not your
Is there any good news?
Utah has one of the lowest costs for property insurance because, with the exception of earthquakes, we don't have natural disasters like other parts of the county. I'm talking about Florida's hurricanes and Oklahoma's tornados. Also, earthquake insurance has come down in Utah.
Who should I talk to?
Nestwell always encourages our clients to talk to experts and do their own investigated work to determine what risks you as an investor can stomach and what risks want to insure against. For a list of questions and additional information, here's a Consumer's Guide to Earthquake Insurance.
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