We recently purchased a home. The other day we sat down with our insurance agent to go over our coverage and make sure we were happy with it. Insurance for most disasters (fire, flood) have to be purchased as separate clauses. Most of them are a reasonable cost or we don't live in an area where we could expect to have that disaster. Then we got to earthquake insurance.
We live along a mountain range and a known fault line. So we asked about earthquake insurance, since it seems a reasonable risk. The deductible for earthquake in insurance in our area is 10% of home value. That seems like a huge amount. On the other hand, it is less than total replacement cost.
So, I guess what I'm trying to ask is: How do you evaluate how much disaster recovery is likely to cost, so it can be compared to the deductible? This is a good policy if damage would likely cost upwards of 50% of home value. It would not be worth so much if it's likely under 10%.
I'm hoping this is generally phrased, as different areas likely have different prime disasters with higher costs. I'm also curious if this is typical of earthquake coverage, while other disasters have lower deductibles.