If you don't have earthquake insurance, even if your home falls down, you're still on the hook for the mortgage. But there's a new alternative to give you earthquake "mortgage" insurance.
One company offering the insurance is "Ace USA." It offers disaster insurance to help cover your mortgage in an earthquake, or any other calamity like a windstorm. But until we made inquiries with the insurance commissioner, little was known about these policies.
"It's one that's really below the radar as far as what we interact with as insurance professionals," said state Insurance Commissioner Mike Kreidler.
The person who passed along the letter he received about the insurance says it would cost about $35 a month to help pay the mortgage on his brick home.
Brick homes are the most expensive to insure, and yearly premiums can cost up to $10,000. A wood frame house would cost in the hundreds.
"The reason is that wood flexes and masonry shatters," said Karl Newman, President of the Northwest Insurance Council.
The mortgage insurance would pay up to two years of mortgage payments while your home was being rebuilt and would pay off $250,000 of your mortgage if you could not rebuild.
"I think people have to look at it carefully from the standpoint of what do they see as their real risk," said Kreidler.
But there are drawbacks. One is that repair work would have to start within three months of a disaster. In a big disaster like an earthquake, could you even get a contractor or a permit that quickly?
"You may or may not be able to start construction within 90 days," said Newman.
And to get the $250,000, the land the house was built on would have to be condemned. That happens, but not in most cases.
"For just a couple hundred dollars more a year, most people could get full-on earthquake coverage, which guarantees hundreds of thousands of dollars to rebuild your home," said Newman.
Ace says it works with customers, and even in the wake of Hurricane Katrina is paying on a number of policies. The company won't say how many policies it has written in Washington state.
