Earthquake Preparedness + Flood Insurance

On August 24th 2014 in the early morning, San Francisco was hit by a 6.0 earthquake. Not a very large quake in the scheme of things. The problem is that this small quake caused $4 Billion in property damage and business interruption losses. A large quake in the lower mainland is projected to do up to $25 billion plus in property damage and another $70 Billion in business interruption losses.
The ring of fire is a circle of quake faults that circles the Pacific Ocean. The west coast of North America is thus far the last place on that circle to not have a major quake. It appears thatimage1 we are all grossly unprepared for such a large earthquake. FYI: Some people are under the impresion that in the event of an earthquake the government will step in and pay to repair everything. These people are mistaken. To assist you we have provided several links to information on our website that advises on how to protect you and your family in the event of an earthquake (while you are there check out some of our other tips and ideas).
Earthquake: Before, During, and After: http://legearpelling.com/earthquake-before-during-and-after
Prepare for an Earthquake: http://legearpelling.com/prepare-for-an-earthquake
Tsunami Facts: http://legearpelling.com/tsunami-facts

Condominium Conundrum on earthquake
image2 Anyone living in or owning a strata property should have a real concern as to when or even if their building will be rebuilt after a major earthquake. A strata property worth $80,000,000 to rebuild will likely have an earthquake deductible of $8,000,000 to be shared among all of the owners. Most condo owner policies include some coverage for earthquake deductibles. The problem is that statistics say that only 50% of owners buy a condo policy. So that means that $4,000,000 would need to be raised before the insurance company would start any repairs to the building. To raise the funds strata’s would have to put leans on individual units and then sue to sell. In the event of a major loss property values are certainly going to plummet temporarily which means many owners may owe the bank more than their properties are now worth and these owners could choose to walk away if they get a special assessment requiring them to cover their share of the EQ deductible. This would make the shortfall on the deductible even greater.

So What Should A Condo Owner Do??
Looking at other earthquakes and major flooding claims from around the world it is clear that it can easily take 2-3 years for a building to be rebuilt assuming things go well. It could be upwards of 5 years if they don’t. So if you are one of the 50% that does buy an insurance policy you may want to think about increasing your additional Living expense coverage to cover your expense while you are waiting for the building to be rebuilt. Most carriers give you 30-50% of your content limit for additional living expenses. That figure may serve you well for a small fire that keeps out of your condo for 6-8 months, however, if you divide that number over 24 to 36 months it rapidly becomes inadequate. This is assuming that rentals would be available at similar prices. Chances are that in the event of a major quake there will be a shortage of  accommodations which will drive up prices making your additional living expense even less effective or forcing you to leave the lower mainland for a period of time.

More Bad News for Condo Owners.
Image3 The strata act was changed several years ago. Since that time it has evolved as property managers have assisted strata councils to amend bylaws and several court cases have clearly delineated who is responsible for what. When it comes to water, the individual unit owner is responsible for any repairs to his unit in the event a pipe bursts in the ceiling or wall. The strata is responsible to repair the burst pipe but any water damage or repairs to the walls required as a result of tearing out to repair the pipe falls in the lap of the condo owner up to the limit of the strata deductible. This is usually covered under a condo policy.
In addition, in the event any water emanates from your unit into common property areas or into a neighboring suite, you would be personally responsible to pay the strata policy deductible which normally ranges from $10,000 – 25,000. Most condominium policies cover up to $25,000 for strata deductibles.

If you want more information on any of these topics please feel free to contact us at  Tel. 604.264.0480. We’ll be happy to assist you!

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