March: Home Hazard Hunt
Home Hazard Hunt E-Prep Program:
Earthquake deaths, injuries, and property damage are usually caused by falling and moving objects. Destruction of property is mostly caused by partial building collapse, flying glass, overturned bookcases, furniture, and appliances, and by fires from broken chimneys, broken gas lines, and downed electrical lines.
Much of this destruction can be prevented by doing a little detective work and preventive maintenance. This month, in our E-Prep Program, you will focus on conducting a Home Hazard Hunt to identify the potentially life threatening hazards in your home. Taking action to correct, or mitigate, for these hazards will be the focus of several succeeding month's E-Prep activities.
E-Prep Activities for March:
- Click on the Hazard Hunt link below to open a folder containing a Hazard Hunt Checklist and Hazard Hunt Action List. Print both forms and add them to your Family Disaster Plan notebook for handy reference.
- Calendar a morning or afternoon to meet together as a family and conduct your Home Hazard Hunt together.
- When you meet, go through your home, room by room, and identify all possible interior hazards (items 1-7 on the Checklist).
- Then inspect your home for utility and structural hazards (items 8-10 on the Checklist). If you do not feel comfortable or qualified in completing the structural inspection, please contact a qualified earthquake engineer to check your house and surrounding area to see if any hazards exist.
- Record what you find on your Home Hazard Hunt Action List. Keep this information in your Family Disaster Plan notebook for the time being. You will mitigate for these hazards in upcoming months.
- Calendar another Home Hazard Hunt one year from now. It is a good idea to inspect your home once each year to find and correct potential fire and safety hazards.
The Pros and Cons of Earthquake Insurance
The most intelligent approach to considering earthquake insurance, as with other kinds of insurance, is to buy coverage only when the lack of it will create a financial burden. In short, it is necessary first to decide at what level of loss ($25,000 / $50,000 / $100,000...) the repair or re-building of your home becomes an unacceptable burden. This is an individual financial question, but we can look at a hypothetical case to help in making this judgment. LET'S ASSUME...
1. That the cost of replacing your home, the Replacement Cost Value or RCV, is $130,000.
2. Now let's assume that a major earthquake (8+ on the Richter Scale) occurs in your area and your home is either damaged to the extent of 10% of the RCV or, on the other extreme, totally destroyed. The dollar loss would be either $13,000 or $130,000 in terms of structure only.
3. Valuable contents of your home may be damaged or destroyed, including furniture, fixtures, and appliances. This cost can be estimated as a percentage of the house damage, say 20% or between $2,600 and $26,000 with total destruction.
4. Consider that there will be some dislocation of your family while the home is rebuilt. This could range from two weeks for minor damage to six months for a totally destroyed home (particularly when contractors will be in great demand). At an average weekly cost of $500, for example, this relocation cost could be $1,000 or $12,500.
LET'S ALSO ASSUME...
That your liquid assets (excluding a pension fund and social security interests) amount to $232,000.
HOW MUCH IS ENOUGH?
A generally accepted rule of thumb is that you should not risk more than 10% of your liquid assets, or about $23,000 in our hypothetical case.
The conclusion that can be drawn in our hypothetical case is that minor earthquake damage can be borne without insurance coverage, but the potential damage from a major earthquake far exceeds safe financial guidelines. This in turn suggests that most homeowners should have earthquake coverage. The coverage should recognize the homeowner's ability to assume some of the loss, up to $23,000 in our example, in return for lower-priced catastrophe coverage that meets the critical financial need.
As when buying any insurance coverage, make sure you understand what is and is not covered, the amount of the deductible, and whether required code upgrades are covered.
Information provided by EQE International and used with permission.