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The Napa Valley is still recovering more than a year after a 6.0-magnitude earthquake struck.
The temblor on Aug. 24, 2014 caused around $360 million in property damage. One year later, 62 properties remain red-tagged in Napa, meaning they are too dangerous to access. Another 900-plus properties have yellow tags, meaning access is restricted.
With only an estimated 12 percent of California homeowners carrying earthquake insurance, are homeowners making a rational choice when they do not to buy coverage?
One common rationalization is the homeowner will just “hand over the keys to the bank” if a severe earthquake strikes. That’s not a good idea, because a foreclosure on an earthquake damaged home means all the equity is lost and going into foreclosure puts your credit rating in jeopardy.
Another reason for skipping coverage is the homeowner will just “apply for government assistance.” That common assumption does not understand that FEMA’s maximum grant to homeowners is $32,000. The aid is really intended to get people back in their homes, not rebuild homes.
Read more about why other common rationalizations for passing on purchasing earthquake coverage are not right at Property Casualty 360.