How Can The Bubble Make An Earthquake Worse?

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Just ran across a story in the Insurance Journal headlined "Officials Hope '06 Quake Centennial Prompts More to Get Insurance." They're talking, of course, about the anniversary of the San Francisco earthquake of April 18, 1906, which ranks among the most devastating quakes ever.

Why is this issue related to the bubble? Because housing prices have soared, that's why. Home buyers are strapped just to make their monthly payment, and so a lot of LA residents have cut costs by not purchasing earthquake insurance. In addition, the bubble has caused many properties to increase significantly in value. That's a problem too. If an existing home owner hasn't had their home regularly reappraised, and then adjusted their insurance coverage accordingly, they're going to get screwed if tragedy strikes. Policies pay off based on the value of the home when the policy was written, or last adjusted. What do you want to bet that some $800,000 homes are only insured at $350,000 or less? I'm going to guess tens of thousands.

And so, that's why some are hoping the San Francisco earthquake anniversary will help raise awareness.

And, knock wood, it will all be for naught and we won't need any of it.

— The Boy in the Big Housing Bubble