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Is the next “big one” coming? Should you add earthquake insurance?

As financial planners, we get this question often. The answer to this question is less clear than other areas of risk management because there are many variables unknown variables, including the probably and extent of damage, and the usefulness of the high deductible vs. actual claim. It is easier to quantify the risk of death, disability, long term care, and portfolio performance.
If we think about a process to get to the right answer for your, the first question to you is, "what prompts this question?" Perhaps there is a deeper discussion that merits review, or a different question entirely.
The next question is, “do you have the resources to survive this risk?”Though no one likes to experience loss, some families can survive financiallya negative event like this. So perhaps owning the risk is acceptable. If you cannot survive this risk, or do not wish to own it, the next step is to consider your resources in view of the following scenarios:

  • Total loss from an earthquake without insurance
  • Total loss from an earthquake with insurance
  • The purchase of earthquake insurance and no loss (and the impact of that unneeded expense)

This process will give clients greater clarity on the range of potential outcomes, and helps to sort out how it works for them personally. This is otherwise known as an informed decision.
Consider the possibility of the actual risk, which no one really knows. If you think about the 1989 Loma Prietaearthquake, the loss of property and life was devastating. But it was still much less than one-half of 1% of the homes in the earthquake zone.
Finally, for some clients, having earthquake insurance offers peace of mind. For them, they generally cut back in other areas of their family spending to afford the peace of mind. And there is absolutely nothing wrong with this financial decision.
As part of our overall planning process, we are happy to review this question with you and your family.

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Resources for Real Estate Investors

I am happy to share below a few recent articles to help real estate investors. Cornerstone Wealth Management continues to offer planning services to those who own directly-held real estate investments. “Directly-held” differs from other types of real estate investments as they are typically owned directly, and not through a large fund.

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The Cost of Long Term Care 2017

For American’s looking forward to financial independence, the risk of Long Term Care (LTC) continues to represent the biggest risk to their financial independence. Look around you, and you will find either family members or friends with family where LTC has changed the dynamics of those impacted, and their loved ones.
To give some insight on the cost of this risk, I have access to an excellent resource that can provide costs of various long term care services, by submarket (ex. San Fran, Stockton, Amarillo TX, etc.). This is anywhere in the country, the info is real time, and the output can provide a breakdown of costs for
Skilled Nursing – Daily Averages

  • Semi-Private Rooms
  • Private Rooms

Home Health Care – Hourly Wages

  • Home Health Aid
  • Licensed Nurse
  • Registered Nurse

Assisted Living Facility – Monthly Averages

  • Studio Apartment
  • 1-Bedroom Apartment
  • 2-Bedroom Apartment

Big picture, the photo is a heat map of overall long term care costs. But like I said, I have access to this information by sub market. My office is also available to help with discussions on long term care (the risk, and insurance), life insurance, disability income replacement, and advanced estate planning. Please let us know if we can help.