As the water began to drain from New Orleans in 2005, we learned that most of the homeowners in New Orleans did not have flood insurance, since they were supposedly in “low risk” areas. The over 60% of homeowners will need to depend upon their own savings, and limited federal assistance, to rebuild New Orleans – at an uncalculated cost for homeowners and taxpayers.

Could that level of disaster, especially that level of uninsured disaster, happen in California? Less than 15% of California homeowners currently carry earthquake insurance, due to its high cost, the “can’t happen to me or my house” factor, and mortgage providers not requiring coverage. The next big quake will result in billions of uninsured damage – but is earthquake insurance really worth the high cost?

How Did We Get Here?

The state of California requires that all homeowner’s insurance providers to at least offer earthquake insurance (albeit, at a high cost). Until 1994, it was widely available – but the high damage costs of the Northridge earthquake resulted in 97% of homeowner’s insurance providers pulling out of the state the California. In response, the California Earthquake Authority was formed by the California legislator to provide earthquake insurance.

What Is the California Earthquake Authority, and How Does It Work?

The California Earthquake Authority provides two-thirds of the earthquake policies in California, sold through their member providers, like Allstate and State Farm. A homeowner purchases the policy through their regular insurance agent, but the policy is actually a CEA policy.

The CEA currently has about $7.2 billion to pay claims, which it states is enough to pay foreseeable damages (Loma Prieta in 1989 had $6 billion in total damages). If the damage claims are more than $7.2 billion, then each claim would be paid a prorated portion of their losses – unlike a regular insurance company, which promises to pay the actual damages under the insurance policy. The state of California cannot help pay the claims out of general funds.

The policies also have a high deductible – usually 15% of the value of the dwelling. In other words, your home must be damaged more than 15% of its value before the insurance starts paying. So, this insurance is not for cracks in the driveway – it is for significant structural damage to your home. The policy also pays for limited contents (starting at $5K) and loss of use (starting at $1500).

Why Is Earthquake Insurance So Expensive?

Insurance policy premiums are calculated based on probabilities – the probability that a house like yours in a neighborhood like yours will catch fire, or a driver like you will have an accident. With data from millions of homes, these probabilities can be calculated with reasonable accuracy. But, no one can reliably predict the probability that there will be an earthquake strong enough to damage your home.

And, as you can imagine, damages from an earthquake, flood, or hurricane, are widespread, over potentially thousands of square miles – instead of one or a few dozen homes, as in a fire. As such, the insurer would have to pay either zero claims, or billions of dollars of claims – too much variance to reasonably plan for or price accurately.

Are We Really At Risk Here in San Jose?

According to the USGS, there is a 62% probability that there will be an earthquake of 6.7 or greater (like the Northridge quake) in the Bay Area in the next 30 years. In my zip code (San Jose 95126), USGS calculates a 80% chance of a 6.0 earthquake and a 20% chance of a 7.0, in the next 30 years. Whether you consider that to be a high risk depends on your risk tolerance for earthquakes – I consider that a high risk of a moderate earthquake and a somewhat low risk of a terrible earthquake, over the next 30 years.

But like any issue involving real estate – it is all local. Where your home is actually located significantly affects your risk – bedrock, reclaimed land from the bay, soil type, nearby streams, actual distance from the epicenter – all can affect potential damage.

But of course, many earthquakes occur where the USGS was not even aware of a fault line – and we never know when or where it will happen, until it happens.

Should I Obtain Earthquake Insurance?

Factors to Consider:

• Could you afford to pay for the rebuilding your home from your own savings & investments?
• Can you afford to pay the high cost of insurance, indefinitely?
• Could make payments on your current mortgage and on a new loan to rebuild?
• Can you mitigate your potential losses by bolting your roof to the walls and the walls to the foundation, for example?
• What is your tolerance for the risk of an earthquake?
• What is the risks of your current home construction (type, age, foundation)?
• What are the risks of your specific location (soil type, distance to known faults)?

Are the Costs Worth It?

Let’s assume that you have a home that would cost $250K to rebuild, you will own the home for the next 30 years, and your earthquake premiums are $1200 per year. Over the next 30 years, that would be a total of $36,000 in premiums (assuming your premiums do not increase, to simplify calculations).

Instead of purchasing insurance, you invest the premiums in a diversified mutual fund. With an 8% annual return, you would have $135,000 (pre-tax) in year 30.* But of course, you only have that total in year 30, not in year one – meaning that if the earthquake happens tomorrow, you don’t have the money.

The deductible is another big turn off for many homeowners. The insurance pays only for large structural damage, not broken dishes or cracked driveways – meaning that it is less likely you will use it. However, be aware that you will not need to come up with the cash for the deductible – you may either opt to not undertake those repair or rebuilding costs, or you can apply for an SBA loan to pay for the deductible (assuming a federal disaster area is declared).

Why Not Just Get Federal Aid, or “Walk Away” and Let the Bank Have the Property?

The federal government would probably provide access to SBA loans, if the area is declared a federal disaster area (no small business required). However, the $200K maximum SBA loan may not be enough to rebuild your home – and, it is a loan that you need to pay back (in addition to your current mortgage).

If you have refinanced your mortgage, you have a recourse mortgage – which means that not only can the bank foreclose on the property in case of non-payment, the bank can also come after your personal assets and future income in case of non-payment. So you cannot just walk away, especially if you have a good income and some personal assets. The bank may help out by deferring payments for a few months, but you still must pay back the loan.

Last Thoughts

We have earthquake insurance on our home. Our home was not yet built in the 1906 earthquake (so who knows if it would stand), it is 75+ years old and is not bolted to the foundation, and we have a refinanced mortgage. For my family, the insurance premiums are worth peace of mind in case of a major earthquake disaster. That’s exactly what insurance is for – the “you never know.”

*calculations ignore inflation

Many insurance agencies have not yet formalized their lead scoring system. This is a worthwhile endeavor for all agencies, and one which should be revisited every year, while tracking the return on investment of their marketing programs.

What is lead scoring? It is a methodology used to rank prospects against a scale, and then assign a value to determine interest level and distribution. For example, let’s say a trucking insurance lead appointment arrives at your agency. This lead is with an owner of 15 power units, they use company drivers, and they are unhappy with their carrier. Perhaps your lead scoring system falls on a 1 to 10 scale, and this lead is scored an 8. What might receive a higher score? And what types of leads are outside of profile, and what score would they receive? Perhaps prospects need to score an 8 to appear on your producer scorecards.

Is the lead distributed to producers by territory? Does your lead handling process vary by type of lead, product or prospect? For example, are commercial leads separated by large and small business, by industry or product? Are benefit leads parsed by groups over and under 50? And does your agency have a tracking system in place to determine how many leads showed for the appointment, moved into the pipeline, received quotes and ultimately convert into new business?

Salespeople, sales managers, producers and other business people often refer to prospects in vague terms such as: new, warm, hot, cold, likely, qualified, etc. These terms do little to better understand a sales pipeline or convey likelihood of purchase to other members of the team. Agencies can consider creating a simple prospect scorecard to resolve this issue and quantify their lead scoring. Formalizing lead scoring offers benefits such as:

• Helps Producers create ideal attributes to form a buyer persona
• Creates a simple numeric system to leverage your buyer persona
• Assigns numeric values to rank your best prospects
• Creates a simple qualification acronym to determine likelihood to close

What should be included in a prospect scorecard?

Use a prospect scorecard to quantify your approach to pipeline building. Some attributes of your ideal client might include revenue, growth rate, client type (business or consumer) and market niche. For example, are you targeting companies with $5m to $10m in revenue? Are your best prospects fast-growing firms, trucking companies, manufacturers or consumers?

If you’re selling to consumers, are they high net worth, middle-income, millennials or senior citizens? Are your prospects in a specific niche market such as banking, insurance, biotech, consulting, education, etc.? Create a scorecard with your ideal attributes and a customized qualification abbreviation to help you determine if you’re selling to an in-profile prospect.

Insurance agencies and brokers seeking to get to the next level with their insurance marketing and lead generation, but lacking the internal resources to achieve their marketing goals, can reach out to a proficient insurance agency marketing firm.

Some insurance companies may title themselves as providers of very cheap car insurance no deposit or cheap auto insurance for full coverage. But, what they do here is, that they provide insurance policy covering only the bare minimum necessities that can simply help one to be termed as a legal driver, i.e. their schemes only provide the basic physical injury and property damage liability coverage at cheap rates.

Hence, instead of going for a cheap car insurance, one must look for policies that provide quality coverage plans along with affordable rates that can help in the long run.

Is it possible to lower Insurance Premiums?

The answer to this question is a big ‘yes’. Getting quality coverage doesn’t really mean that one has to pay premiums that are out of one’s capacity to earn. There are several ways one can lower their insurance premiums and enjoy cheap auto insurance full coverage. Here are a few simple ways to pay low premiums for quality coverage:

• Choose a wise billing plan: One should look for insurance companies that provide convenient billing schemes, like monthly, quarterly, annually or semi-annually so that the shopper can choose a plan fitting his/her needs and eventually pay at the time when he/she is comfortable.

• Be careful in selecting a coverage plan: One can pay low premiums by deducting one or the other type of coverage from their policy depending upon their needs. For instance, if one drives an old car with great mileage, then one can prefer to remove comprehensive or collision coverage from their policy and reduce the premiums to be paid.

• The type of car: The type of car one opts to drive has a direct impact on one’s car insurance rates. Expensive cars are costly to insure and hence their premiums will be more. It should also be noted that the car’s age can also affect the premiums. Older the car one drives, fewer the premiums one has to pay.

• Clean driving history: If the driving record is clean, i.e. without any tickets or accidents, then the driver can avail discounts on the premiums and enjoy cheap auto insurance with full coverage.

• Avoid joint policies: If the driver opts for a joint policy package, then the car insurance rate will automatically increase, especially if the other person is a teenager. Teen drivers are prone to more accidents and hence, they are liable to pay the highest premiums. Thus, it is advisable to avoid this type of policy to lower premiums.

• Deductible price: One can enjoy significantly lower premiums if one opts for higher deductibles. While this will increase the chances of paying out of one’s own pockets in risky situations, but the premium to be paid on whole will reduce for sure.

By taking care of all the above key factors, one can easily save on their premiums and enjoy the benefits of cheap auto insurance for full coverage.

With all this said, many drivers who own classic cars might still have their doubts uncovered. Owning a classic car is not similar to that of other motorists. So here’s a detailed description of the type of benefits, owners of classic cars can avail and at the same time enjoy cheap car insurance full coverage, like the rest of the automobile owners.

Cheap Insurance Rates for Classic Cars:

When the company talks about coverage for classic cars, here is a list of cars the insurance company is probably talking about:

• Morris Marina

• MGB

• Alfa-Romeo cars

• Ford Cortina

• Vauxhall VX220

• Hillman Imp

• Austin Seven

• Manta

• Triumph

• Jaguar

• MX5

• Opel

One should be clear of the fact that not all insurance companies can provide affordable coverage for all of the above classic cars. There are a very few insurance companies that provide coverage for all classic cars, including the cars that are just about 5 years old.

If one decides to opt for quality over quantity to insure such classic cars, the following are the benefits one can enjoy:

• Coverage for true value: While looking for cheap car insurance near me, one should opt for an insurance company that will provide agreed value cover for the car’s true value rather than just paying off the market value.

• Discounts on Limited Mileage drives: Insurance companies that provide quality coverage will not only offer discounts on limited mileage drives but also insure classic cars that are driven more often.

• Laid-up policy: Always prefer insurance companies that will provide full coverage and accept claims for both accident and theft risks for classic cars.

• Discounts on club memberships: While insuring classic cars one can avail discounts up to as high as 15% on memberships to different classic car owners clubs or other specific memberships like jaguar enthusiasts club.

• Car kit insurance: It is better to opt for insurance companies that provide car kit insurances.

• Coverage for modifications: Classic car insurance should also cover charges for modifications made to the car.

• Other special coverage: Quality coverage plans might also include special covers like wedding hire cover or track/rally cover. These are not very common but can be included upon request of the car owners.

If one is choosing to buy cheap auto insurance online, then all of the above factors or benefits must be kept in mind to avail the best possible policy. One can, however; leave one or more of the above benefits solely depending on one’s interests and needs. But it is highly recommended and advantageous as well, to have all of the above benefits while choosing for classic car insurance.

On a general note, one should understand the fact that it is definitely possible to enjoy the benefits of cheap auto insurance for full coverage, provided that the quality should not be compromised so that one will be safe from unexpected charges in the long run.