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Cliff Hockley, President
Bluestone and Hockley Real Estate Services
What do the following states and territories have in common?
- Alaska
- California
- Commonwealth of Northern Mariana Islands
- Guam
- Hawaii
- Idaho
- Montana
- Nevada
- Oregon
- Virgin Islands
- Washington
- Wyoming
Federal Emergency Management Agency, (FEMA) and the US Geological Survey have decided that there is a very high risk of an earthquake in these states and territories. (Study last updated 19 April 2006, see chart at bottom for high risk states.) In the Pacific Northwest the closer you are to the Cascadian Subduction Zone the more likely you are to have damage in an earth quake:
What is the Cascadia Subduction Zone ?
The Cascadia subduction zone is a very long sloping fault that stretches from northern Vancouver Island to northern California. Because of the very large fault area, the Cascadia Subduction Zone can produce very large earthquakes of a magnitude of 9.0 or greater, if a rupture occurred over its’ whole area. (Nedimovic, et al., 2003)
The Cascadia Earthquake was the last known great earthquake in the Northwest dating back to January of 1700. Geological evidence indicates that great earthquakes may have occurred at least seven times in the last 3,500 years, suggesting a return time of 300 to 600 years. According to Japanese records, there is evidence of accompanying tsunamis with every earthquake. Other similar subduction zones in the world usually have such earthquakes every 100–200 years. The longer interval here may indicate unusually large stress buildup and subsequently an unusually large earthquake slip. A future rupture of the Cascadia Subduction Zone would cause widespread destruction throughout the Pacific Northwest.
http://en.wikipedia.org/wiki/Cascadia_subduction_zone.
What can I do to protect my investments located in the zone?
- You can make sure your properties are reinforced to current earthquake construction codes (standards).
- You can buy earthquake insurance.
- You can log into the US Geological Survey website or the website of the Western State Seismic Policy Council (earthquake.usgs.gov or www.wsspc.org) to stay abreast of seismic activity near you.
- You can do nothing and hope that an earthquake will not occur while you own your investments. Unfortunately, this will not protect your investment. Don’t assume a government agency is going to bail you out.
Let’s say I purchase insurance, can you give me advice?
Key factors to consider are:
- The financial strength of the companies that will sell it to you
- The features of the companies will sell to you
- The amount of equity you have in your investment
- Your proximity to a fault zone The age and style of construction of your home and foundation.
If you decide to buy earthquake insurance shop for limits that will be adequate to fully replace your property. Include lost rents, code compliance and temporary living expenses for your tenants to name a few.
Buy the insurance from a reputable company and agent. Have the agent explain in detail what is covered, and what is not. Earthquake insurance is very complicated, calculating deductibles is even more complicated.
There is a competitive market for earthquake insurance and you will want to get more than one bid. Make sure both companies are bidding the same thing. Realize that the insurance also needs to cover outbuildings, swimming pools, driveways and asphalt, because these items can and will be damaged in addition to the buildings when we have a sizable earthquake.
There is a wide range of deductibles available. You need to consider your exposure and risk, whether your have partners in the property if any, and if they have the financial resources to rebuild if there is a major earthquake.
Other things to consider: Some of these policies have a completion timeline. In other words, all of the repairs need to be completed within 12 months after an event. If there is a major earthquake you need to make sure you have a great relationship with a contractor to obtain bids, get the insurance companies cooperation, obtain the supplies and have the repairs completed.
Take the time to review the earthquake risks for all of your investments, it might cost you some money to have the properties insured, but you might sleep better at night.
High Risk States
- American Samoa
- Arizona
- Arkansas
- Illinois
- Indiana
- Kentucky
- Missouri
- New Mexico
- Puerto Rico
- South Carolina
- Tennessee
- Utah
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