We live in an accident and disaster-prone world. Some forms of insurance has been around for hundreds of years to help lessen the blow of the major expenses that come after everything from a car crash to a devastating 100-year flood. 

That said, we noticed a common myth about earthquake insurance come up during a recent webinar with our partners at SBP Disaster Recovery.

The Myth

"After a big earthquake the insurance companies will run out of money and not be able to pay out anyway, so earthquake insurance isn't worth it." 

The Reality

When asked if insurance companies will run out of money in the wake of a large earthquake, Kate Stillwell, Founder and CEO of Jumpstart Insurance, said "Short answer, no." 

Why is this false? It boils down to a few simple things...

1. Insurance companies are sufficiently capitalized to handle the pay outs they are legally obligated to distribute according to their policies. 
2. In comparison to the overall population, relatively few actually have earthquake insurance so a large-scale pay out would not happen.
3. Particularly in California there were laws passed in 1996 that mandate a high threshold of claims-paying reserves specifically to avoid what the myth says would happen.

"There is definitely an urban myth that insurers will run out of money in an apocalyptic scenario. This isn't a completely unfounded fear, but in California especially unlikely." -- Kate Stillwell

So there you have it, this preparedness myth has been officially busted! Insurance for the disasters likely to affect your area are a cornerstone of any well-rounded emergency plan. It's important to understand that your own emergency kits and supplies, assistance from local first responders and resources from both charities and government assistance are important, but you also need to insure your home and property to lessen the impact of a disaster and get you back to normal quicker!

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