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Know simple answers to client questions about earthquakes
Earthquakes have been in the news a lot lately. Even though the July Ridgecrest earthquakes struck about 200 miles away, shaking was felt in San Diego County.
Those quakes served as a reminder that San Diego is earthquake country. Future homebuyers may be familiar with the Rose Canyon, San Jacinto, and Elsinore faults, and some may even know that the Rose Canyon fault is capable of a magnitude 6.8 earthquake.
With more potential homebuyers knowing that earthquakes can strike San Diego, your role as a trusted adviser may require you to answer questions about potential shake damage for a house.
Here’s what you can know to help put a client’s mind at ease about their earthquake risk.
Reducing shake damage to your buyer’s older home
According to state law, sellers of homes must disclose certain earthquake deficiencies to the buyer before the transfer, and the seller’s real estate agent must deliver to the buyer a copy of the Homeowner’s Guide to Earthquake Safety from the California Seismic Safety Commission.
Along with the disclosure form, earthquake weaknesses referenced in the guide include:
- Homes not anchored to their foundation
- Weak cripple walls
- Pier and post foundations
- Unreinforced masonry foundations
- Homes built on steep hillsides
- Unreinforced masonry walls
- Rooms over garages
Reducing earthquake weaknesses through seismic retrofitting can be inexpensive compared with major structural repairs caused by an earthquake. Houses that are not bolted to the foundation, for example, may topple during earthquakes. And cripple walls creating a crawl space between the ground and first floor can collapse if not braced.
Protecting your buyer’s finances
When home buyers think about potential shake damage, they may become worried about losing their greatest investment.
Many people believe government dollars can help cover costs for repairs. Yet federal grants are limited to less than $35,000, and federal loans that must be repaid are capped at $200,000. And many in California also believe their residential property insurance policy will cover earthquake damage, which is not true. A separate earthquake policy is required to cover shake damage.
The cost of an earthquake policy is based on many different factors, including the home’s location, age, construction type, and insured (not appraised) value.
Earthquake insurance from the California Earthquake Authority (CEA) has improved during recent years. Homeowner rates have been reduced by a combined 55% over time. And CEA policyholders who properly retrofit their older homes can receive a premium discount up to 25%. Those whose mobilehomes have been certified with an earthquake-resistant bracing system can receive a 21% discount.
And CEA policyholders don’t have to pay their deductible out of pocket to receive a covered claim payment. CEA simply takes the total covered damage amount, subtracts the coverage deductible, and pays the full amount of the covered loss up to the applicable coverage limit.
CEA also covers condo units, with options including Loss Assessment coverage, which helps pay your client’s share of certain assessments levied by their HOA on its members for earthquake-damage repairs or to pay a master-policy deductible.
Finally, CEA Loss of Use—coverage that pays additional living expenses if your client has to live elsewhere because of earthquake damage—never has a deductible for homeowners, mobilehome owners, condo-unit owners and renters alike.
Knowing the answers
Your clients are counting on you to help them find or sell their house. Taking some time to learn about earthquake risk in your region, and how to help your clients mitigate those risks, can help you be seen as the trusted adviser they require.