Should I buy Earthquake insurance for CA rental property?

[Dharmesh R.]

Is it a good idea for landlord to buy EQ insurance in California for a rentla property with significant equity in it? What are the arguments for and against?

I understand it is a strain on cashflow but could it be considered as cost of doing business as shakes are pretty much guaranteed out here at some point.

[Jeff Gates]

Good question. So far I would not. I have revisited this so many times. The deductible is so high, I just don't know how this ever works out. Example last time I looked. If you make a $85K claim and they want you to pay the first $20K before insurance kicks in. And they charge $1000 annually for this. So if you do this for 10 years, your out of pocket is $32K. These earthquakes happen every 75-100 years. Now it can occur much sooner. A better solution is to pull out as much equity as possible. Hedge your risk in a 80% LTV scenario.