In California why mortage lenders require fire insurance but not earthquake insurance?
May 7th, 2010
I asked a similar question but I am still curious why with the threat of earthquakes so strong in parts of California why mortgage lenders don’t require borrowers to get earthquake insurance similar to fire insurance
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Most insurance companies consider an earthquake an “act of God” and they don’t pay out on an “act of God”.
Response to what Funny Girl wrote:
In California, all insurers of residential property must offer earthquake insurance. However, over 2/3 of residential property insurance in California is from companies that use CEA (California Earthquake Authority) instead of assuming the risk themselves.
Since it is available, somehow, the question remains: why don’t mortgage lenders require it?
California has lots of brush-fires when it gets hot, especially around San Diego
With regards to Funny Girl – she is wrong. No where in the policy does it say they do not cover Acts of God. Your homeowners policy does cover most naturally occurring events.
I don’t really have an answer for your question I am just tired of people saying what Funny Girl did because it is so blatantly wrong.
OK, there’s no such thing in insurance as an “act of God”. People make that up. I’ve NEVER EVER EVER read those words on a policy.
I don’t have a REAL answer for you, but I have some guesses. 1. MOST of the value of the average CA home is the LAND value. The insurance policy actually covers the BUILDING, which is usually only about 20% of the value of the property combined. So EARTHQUAKE damage isn’t going to cover anything except the house. So coverage isn’t going to pay off the whole loan, anyway. 2. I think the IDEA of earthquakes in CA is much wider than the claims that support it. Sure, there are rumbles. But so far, not much in dollar damages. That’s probably a combination of construction techniques, and the fact that damages tend to be centralized to a few square miles.
Again, not facts, just guesses. And ignore anyone who says, “Act of God” with regards to insurance; it means they don’t know what they are talking about.