I live in Seattle which is well known for potentially having a huge earthquake sometime in the next 1,000 years. I would like to protect my property against such a catastrophic outcome, but at the same time I have zero trust in private insurance due to the recent COVID insurance stories. Are there alternative options available to me that would pay out a big sum in case the "big one" does hit, but are otherwise worthless? Or perhaps some sort of an insurance on the insurance that is well know to pay out quickly, ideally evidenced via their quick payouts during the COVID crisis?
asked Jan 9, 2021 at 3:10
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2Could someone explain the downvotes? Its a serious money issue and you can look into the recent COVID insurance stories to understand my concerns.– JonathanReezCommented Jan 9, 2021 at 3:37
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9I can't tell what you're actually asking for. It sounds like you're asking for insurance that isn't private insurance—does that mean you're only interested in insurance that's sold by the government? Or, it kind of sounds like you're asking for a contract that pays out in the event of a disaster, but isn't insurance. But that's impossible because that type of contract is what the word "insurance" means. Or it seems like you're asking for insurance which is sold by a company that doesn't sell insurance; that's obviously impossible too.– Sophie SwettCommented Jan 9, 2021 at 3:51
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1@TannerSwett mutual insurance is the only other option, since -- even though it's private insurance, the company is owned by the policyholders.– RonJohnCommented Jan 9, 2021 at 3:54
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2The OP is correct in distrusting private insurance. Many, many businesses took out business interruption insurance and the insurance industry is trying to avoid paying hundreds of millions of dollars to businesses forced to close because of the pandemic. It's now in the courts. Meanwhile, the businesses paid the premiums but got nothing in return, other than out of business.– Bob BaerkerCommented Jan 9, 2021 at 15:08
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3I cannot see the slightest reason anyone would downvote this?– FattieCommented Jan 9, 2021 at 15:25
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3 Answers
Your best option is to move somewhere that doesn't have an earthquake risk.
If you don't trust insurance companies, then make life choices to avoid all risks that you can.
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I have to accept this as the best and most obvious answer :) Commented Jan 10, 2021 at 0:41
Self insurance is probably your best option here. Put a certain amount of money into a separate savings account every month and in case of a damaging earthquake, use that to recoup your losses. Yes, the "payout" won't be as high as that of a standard insurance policy, but by self insuring you're forgoing the risk pooling that comes with many policyholders paying into a fund (the insurance company) and only a subset of them receiving a payout.
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1Some physicians in higher risk specialties self insure because their malpractice insurance costs six figures but self insurance isn't practical for typical homeowners because whatever they can save won't add up to scratch if their home is demolished. Commented Jan 9, 2021 at 23:46
As MichaelA answers, the only alternative to insurance is self-insurance.
• This is not a whacky idea. Note that it is fairly common that corporations "don't like" insurance so they self-insure certain risks: i.e., they judge financially that it's better to self-insure.
• A simple real-world example, I have never in my life bought "comprehensive" car insurance on any vehicle, anywhere in the world. {Obviously you should, and of course in most jurisdictions legally have to, buy 3rd-party insurance.†} Hence if I ever have a car stolen, burst in to flames or the like ... it's a straight loss. But on the other hand I have saved all those premiums on all those cars all those years. (If you're wondering, the outcome is I'm wildly ahead; I've never, ever had a car stolen, burst in to flames, etc - even once.)
In answer to the question at the end...
Or perhaps some sort of an insurance on the insurance that is well know to pay out quickly, ideally evidenced via their quick payouts during the COVID crisis?
Yes, in the US "Aflac" exists for exactly that purpose:
https://www.youtube.com/watch?v=Pj3B9PFNvZQ go to 0:15
https://www.youtube.com/watch?v=SaVTrV0Wsew go to 0:21
(Roll tide!)
† Of course, if you get a car loan, you are forced to get comprehensive insurance by the loan company.
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Afiac seems to be focused on healthcare insurance though. Commented Jan 9, 2021 at 19:06
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5Self insurance only works when you can afford the loss. Most people can't afford to rebuild their house after an earthquake destroys it.– minouCommented Jan 9, 2021 at 22:56
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2"corporations "don't like" insurance so they self-insure certain risks." Corporations like insurance fine enough; they self-insure when they think they can do it cheaper.– RonJohnCommented Jan 9, 2021 at 23:26
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hi Ron - right, that's literally what the sentence says! "ie, they judge financially that it's better to self-insure."– FattieCommented Jan 10, 2021 at 16:27
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@JonathanReez - true; (I'm not sure what else they do) ... but it was the only example I know of of the interesting concept you raise.– FattieCommented Jan 10, 2021 at 16:29