Everything You Need to Know About Earthquake Insurance

The United States experiences nearly 20,000 earthquakes every year. While most are small, some produce devastating effects. Just this past week in California, two earthquakes rocked Southern California--including one that reached a 7.1 on the Richter scale. The quakes sent people fleeing for safety as buildings shook and fires erupted.  

Today, it’s no wonder that the quakes have left everyone nervous. Jason Corona, whose family owns a restaurant near the epicenter of the 7.1 earthquake, said  "It's constant adrenaline because we don't know if the little one is going to be the next big one."

While we don’t know when the “Big One” is coming, we can still make sure that we’re prepared through both Home and Commercial Earthquake Insurance. 

Earthquake Insurance for Your Home

Even though earthquakes can be devastating--the recent one in California ended with gas leaks, fires, and water main breaks--hardly any renters or homeowners have Earthquake Insurance. In fact, only 13% of homeowners in California have Earthquake Insurance, despite the number of quakes the state experiences every year. 

And your standard Renter’s or Homeowner’s Insurance won’t protect you. For earthquake coverage, you’ll have to seek out a separate policy. The separate coverage is so important that in California your insurance company is obligated to offer you a separate earthquake add-on. You can also purchase coverage through the California Earthquake Authority. 

The Scope of Home Earthquake Coverage

Your Earthquake Insurance will make sure that you have a roof over your head after a major quake.

Expect Your Personal Earthquake Insurance to Cover the Following

• Your home or rental unit.
• Personal property in your home, including your furniture, TVs, and computers. 
• Additional living expenses or loss of use of your home.

Despite Everything That the Coverage Provides, You’ll Also Want to be Aware of These Common Exclusions

• Fire: Earthquake Insurance won’t cover anything that your Homeowner’s Insurance already covers; so if your Homeowner’s policy covers fire, your Earthquake Insurance won’t.
  
  
• Land: Your Earthquake Insurance typically won’t cover land damage, such as erosion or sinkholes, that can occur following an earthquake. 
  
  
• Vehicles: You’ll need to rely on your Auto Insurance to provide coverage for any damage to your vehicles after an earthquake. 
  
  
• Flood: Quakes can cause tsunamis, water main breaks, and other types of flooding; unfortunately, Earthquake Insurance won’t provide coverage for these events, but you can get coverage from a separate flood insurance policy. 

Earthquake Insurance for Your Business 

Standard business insurance policies don’t provide coverage in the event of an earthquake. So if you’re trying to rely on your Property Insurance for coverage, think again: standard policies specifically exclude coverage for events like earth movement. If your business is along a geological fault line--especially in a state like California--then you’ll want to get Earthquake Insurance. 

How to Purchase Commercial Earthquake Insurance

Because most insurance policies don’t cover damage caused by an earthquake, you’ll purchase Commercial Earthquake Insurance either as an endorsement or a separate policy. You can get the endorsement or separate policy from your current commercial insurance provider, a specialized provider, or from an organization like the California Earthquake Authority (CEA). 

What Your Commercial Earthquake Insurance Will Cover

Commercial Earthquake Insurance can cover what would be otherwise devastating financial losses for your company.

You should expect your commercial earthquake insurance to cover the following

• Structural damage to your company’s real estate due to seismic activity.
• Damage to company property including, inventory, equipment, and machinery.
• Depending on your policy, lost business income as a result of the earthquake.

What the Additional Earthquake Insurance May Cost

Your Commercial Earthquake Insurance premium will be based on several factors. Among the biggest factors is the location of your business: you should expect your premium for Earthquake Insurance to be a direct reflection of the earthquake risk in your business’s location.

Premiums in the Western United States, including California, have premiums that are ten times higher than those in the Eastern United States.

Your premium will also be based on the age of your company’s buildings, as well as the type of material used to construct them. Typically, your Commercial Earthquake Insurance will also carry a deductible ranging from 10-15%. 

How Your Other Insurance Policies Might Help in the Event of an Earthquake

Fortunately, you may have some coverage through other insurance policies that you already have even without additional endorsement.

Those policies include the following: 

• Business Interruption Insurance: You should check with an insurance professional to review your policy, but some Business Interruption coverage does not exclude earthquakes.
  
  
• Commercial Auto Insurance: Your Commercial Auto Insurance policy might cover damages to your company’s automobiles as a result of an earthquake, including damage caused by fire or debris.
  
  
• Workers’ Compensation Insurance: If you have an employee injured during an earthquake, you can utilize your Workers’ Compensation coverage for the losses. 

Understanding When You Can Buy Earthquake Insurance: Moratorium Periods

Immediately after an earthquake hits, insurance companies typically stop selling earthquake insurance. This period where they refuse to sell earthquake insurance--known as a moratorium--can last up to three months. When and for how long an insurance company will refuse to sell is specific to the insurer. What this means for you is that you should get earthquake insurance before or immediately once a moratorium period ends so that you can make sure you’re ready for the next time.

Leap | Carpenter | Kemps Insurance Agency Can Help Protect You and Your Company

At Leap | Carpenter | Kemps Insurance Agency, we have experience helping both companies and families in the wake of natural disasters, including earthquakes. We can help you understand your insurance options and select the right insurance for you, your family, and your company. Contact us today to speak to a knowledgeable agent.