Take a chance on quake insurance?

Q: I was recently offered earthquake insurance from my carrier. My thoughts are that it would make more sense to retrofit the house, as you mentioned in a recent article, rather than pay a monthly premium for insurance. What are your thoughts on this? I live about 45 minutes north of San Francisco.

A: The answer of whether to buy earthquake insurance lies in a cost-benefit analysis and your tolerance for risk. A rider covering earthquake damage on a homeowner's insurance policy can double the cost of the coverage and typically comes with a whopping 15 percent deductible.

Considering there have been two major quakes in the San Francisco Bay Area in the 20th century causing significant damage (San Francisco in 1906 and Loma Prieta in 1989), one might conclude the cost is not worth it.

We've owned residential real estate in the Bay Area since the early 1970s. Although our carriers offered us earthquake insurance, we never bought it. We weighed the cost against the risk and opted out. Somehow, protecting against the Big One that never came wasn't a high-priority place for us to put our hard-earned money. In the back of our minds, we supposed the Federal Emergency Management Agency would come to the rescue if a catastrophe happened.

We almost didn't skate, though. We both lived in Alameda in October 1989 during Loma Prieta -- Kevin in his 1879 Italianate and Bill a few blocks away in his 1920s Craftsman bungalow. We'd have thought neither structure would survive a major quake.

Being lifelong residents of the East Bay, we'd experienced quakes before, but nothing like 5:04 p.m. on Oct. 17, 1989. Surprisingly, our homes came through unscathed. The same couldn't be said for the parts of Alameda built on fill, the Marina District in San Francisco, the San Francisco-Oakland Bay Bridge or the Cypress freeway in Oakland.

If there were ever a time that we'd have opted for earthquake insurance, October 1989 would have been it. Instead we decided to take some measures to strengthen our homes against quakes. Bill replaced his foundation with an up-to-code, concrete-bolted version. He tied the cripple wall to the mudsill with plywood that served the dual roles of backing for the shingle exterior and a shear wall. Kevin installed plywood shear walls to the base of the balloon-framed Victorian.

Your choice is a tough one. We recommend that you do a cold-hearted cost-benefit-versus-risk analysis to make your decision.

How earthquake insurance works

Each insurance company determines earthquake insurance rates differently. Generally, older homes cost more to insure than new homes because newer homes have been built to more modern building codes with better defenses against earthquakes. Wood homes get better rates than brick ones because wood tends to withstand quake stresses better. Simply said: Wood bends, brick doesn't. ...CONTINUED

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