One Opinion on Quake Insurance

* I am one of those residents who purchased a home in the Northridge area in December of 1992. By the time I purchased my home (and was having a conference with my insurance agent as to how much insurance I should purchase), my home had already lost $15,000 in value. By the time the Northridge earthquake hit, my $349,000 purchase was worth $250,000.

The damage to my home was estimated at $85,000 and I had to come up with $30,000 as my part of the deductible. At first I thought about walking away from my home, the question being how to obtain that high a loan, having just purchased the property and it going down in value. I even thought that at least I had earthquake insurance purchased on the house, and I had only made one payment before disaster struck. Imagine my surprise when the checks finally started arriving, and they were made out to the mortgage holder and myself. The insurance company’s policy (C.S.E. Insurance) has been--and continues to be, despite the court ruling--that although you weren’t required to have earthquake insurance the mortgage company has a vested interest, and that I would have to take it up with them as to how to use the money.

My opinion is, mortgage companies didn’t ask for earthquake insurance, therefore shouldn’t get the check, but I can understand their side. What happens when people walk away from a property, with thousands of dollars in damage, and the homeowner purchases somewhere else, or uses the money to get out of debt? I was lucky; I was able to obtain a low-cost loan and had ideas for the house that helped me quickly remodel and repair the earthquake damage. But in the back of my mind, I know that if it happens again the same way, I’m outta there, mortgage company be damned. Especially since my insurance rates have gone up, and the deductible is also higher. The property is still down in value, and there’s no way I can pay back my current loan and obtain a new one. Yes, I should be able to use the money however I deem necessary, and if that means paying off my old debts and starting over with a clean slate, letting the mortgage company repair or tear down the property, then that’s the chance one must take. Unless of course, the insurance is required by the mortgage company (knowing the insurance company will just get out, they can’t take the loss). It’s a dilemma that has to be worked out by everyone involved, but for now, it’s a big win for the property holder.

R.C. McKOY

Northridge