What’s Your Risk? The Realities of Business Earthquake Coverage

Earthquake hits office - IMA

The powerful 6.4 and 7.1 magnitude earthquakes that rocked Southern California on July 4th and 5th have many business owners thinking about earthquake insurance. Unfortunately, business earthquake coverage most likely isn’t included in your commercial property insurance – so if you aren’t paying for a specific earthquake insurance policy, then you probably aren’t protected for damages resulting from a seismic event.

Here are some important considerations to evaluate before deciding whether this type of coverage is right for you.

What Does Business Earthquake Insurance Cover?

Business earthquake coverage is designed to help you rebuild and recover after a devastating earthquake. Without it, you would be left with the financial burdens of repairing your building, replacing damaged inventory/equipment, continuing mortgage payments despite the loss of income, and, worst-case scenario, demolishing the structure completely.

Earthquake insurance can vary greatly, but here are some of the general coverages that are usually included:

  • Damage to structures, including direct damage and indirect damage (like flooding caused by sprinkler leakage).
  • Repair/replacement of business contents.
  • Loss of business income.
  • Improvements or repairs required by local ordinance or law.

Who Needs Earthquake Insurance?

According to the U.S. Geological Survey (USGS), the U.S. averages about 20,000 earthquakes each year. Most are small, but since 1990, at least some earthquake damage has been reported in all 50 states. To help property owners decide whether they need earthquake insurance, the USGS provides a list of considerations, which includes: proximity to active earthquake faults; seismic history of the region; building construction; geologic structure of the earth beneath; value of the building/contents; cost of the insurance; and restrictions on coverage.

Earthquake insurance can be expensive, so if you’d be able to fund your own recovery, then you may not need the coverage. However, some lenders will require coverage as part of a loan or mortgage.

What Else Do I Need to Know?

Your Deductible. Like health insurance, lower premiums most often mean higher deductibles. So, it’s important to understand what you’d be required to pay out-of-pocket before your business earthquake coverage starts providing support.

Probable Maximum Loss (PML) Report. For larger property risks, your insurance broker should get a PML report. The PML assessment provides a statistical estimate of the damage your property would likely experience based on certain risk tolerances.

Qualifying Requirements. Your property may need to undergo an inspection and
subsequently require upgrades before you can qualify for business earthquake
coverage. For example, you may need to have the structure bolted to its foundation or new braces installed on walls. Improving your property’s earthquake resistance can also help lower premiums.

We Can Help You Understand Your Business Earthquake Coverage Needs.

At Shank & Associates Insurance Services, we provide a unique perspective on all of your commercial coverage options, and we help to determine which carrier best fits your business needs. We strive to find you the broadest coverage at the best available rate. Give us a call to get started: (833) 878-2820.

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