Decided to open a new thread instead of highjacking others.
I am in So Cal, one property has a large mortgage, the other is paid for. Neither has the earthquake insurance. Nor does my own residence comes to think of it.
In case of a partial or a total loss, what are the consequences?
I realize I need to have a “regular” homeowner insurance on all properties and I do. But… in California insurance companies ( at least the ones i got the quotes from) require a minimum of 15% deductible on the amount insured. That’s 60k on 400k property. I’d really prefer to use that money toward the down payment on another property rather than keeping it liquid to save for possible need as a deductible.
Just wanted your opinion.
My understanding of special insurance like earthquake insurance is that the deductible is not a fixed number but rather a percentage of the claim…like you found out. For your homeowners insurance you can choose to carry an amount like$500 or $1000 as your deductible. If you file a claim due to earthquake damage, the insurance will only pay out the remaining percentage after you pay that percentage as your deductible. I look at this like flood insurance. It may not be required but if the homeowners insurance determines the damage was caused by water and not wind or fire, they can weasel out of paying the claim. You hear of this happening with hurricane damage. Companies will deny claims because the house didn’t have wind damage but flooded from storm surge and excessive rain. So my understanding of your situation is that you would have a premium for earthquake insurance in addition to homeowners insurance but it would have a high deductible if you ever had to use it.
Your understanding is correct.
The premium, although almost negligible compare to the amount of deductible, would be on top of the homeowner insurance. But I am not interested in that, due to the cost.
I was wondering if there is another way of structuring my investments with less of possible total loss exposure. For example, what would happen if I quit claim deed each property to my kids. Would the properties then be covered by FEMA or any other way if the damage is earthquake related?
I never worry about deductibles. I have never had an insurance payout that I could not get the property back in tip top condition under the amount the insurance gave me…minus their deductable and still had money left over. The insurance companies reimburse based on retail prices. That is what I was talking about earlier. The retail price for a roof in Houston after my deductable was $14,000 or something like that. They wrote me a check for $13,800 for a roof. I could have gone to the yellow pages and called Southwest Roofing and they would replace my roof for $12,000 to $13,000, but I called Marcus and he replaced it for $4,900. The deductible is only to reduce the amount they pay, you can always still get the job done for the amount they write the check for.
I had a fire in a unit a few years back. The insurance company wrote me a check for around $20,000. I got the unit back up for around $6,000. I would not sweat the deductible.
Is this not typical of what everybody else is seeing?
that would be nice to see, what someone is getting as far as policy payout. Especially in the earthquake damage cases. I was under impression that most of insurance companies do not pay out until you fork out the deductible.
So, it’s the one think not worry about let’s say $3k deductible for the roof and completely another thing $60k deductible for the earthquake damage.
btw, bluemoon6, how do go about finding the investor grade contractors? I usually am forced to pay very close to retail
No the adjuster for the insurance company makes a valuation say $10,000. Then they say it depreciated 10% and then they are at $9,000 and then they deduct your deductible say $2000 and write you a check for $7000 and walk away. It is up to you to get the house fixed with that money.
The way I found most of my contractors is that I found what most of us call subcontractors. I drove neighborhood under construction. There are dozens of house at various stages of construction open with crews working. I would find some guys installing tile. I walk over to them and ask them if they will install some tile for me. Some won’t, some don’t pan out, and some think they can just charge me retail, but when I find one that works fine he is my tile man. The same for the other crafts roofing, painting etc. I rarely need more than one craft at a time so why deal with a general when I can just go to the craft. It ends up being around ½ what I get when I call the yellow pages. This does not work with electricians or plumbers. Installation work in those trades is a whole different game from repair work. I get these guys from word of mouth from other investors.