Is commercial earthquake insurance necessary?
By Leana Schwartz, Independent Commercial Insurance Agent
Living in Southern California has its ups and downs — as well as some side-to-sides during earthquakes. Many recent media reports have featured expert predictions that that the Los Angeles area is overdue for a major earthquake, perhaps one as devastating as the 6.7-magnitude Northridge quake of 1994.
An article in the Los Angeles Times called the Newport-Inglewood fault one of “Southern California’s top seismic danger zones.” This fault runs beneath densely populated communities and valuable coastal real estate from the west side of Los Angeles to the coast of Orange County. Further, scientists have measured coastal area sinking due to past earthquakes, rekindling some people to fear that “the big one” could cause portions of Southern California to fall into the Pacific.
What is commercial earthquake insurance?
Most commercial property insurance policies exclude earthquake damage, yet many local business owners do not purchase earthquake coverage, even though we live and work in a seismically active area with a history of major quakes.
Commercial earthquake insurance policies generally cover:
- Structural damage due to seismic activity.
- Damage to property such as inventory, equipment, and machinery
- Some policies may also cover lost business income as the business interruption stemming from an earthquake
Why would I need earthquake insurance?
There are two fundamental reasons why every California business owner should carry commercial earthquake insurance.
1. Earthquake coverage is not included in standard commercial property insurance
Virtually commercial property policies specifically exclude damage caused by earthquakes. It is important to understand that commercial property insurance will not pay for fire or flood damage resulting from an earthquake, even if the policy normally covers fire and/or flood damage.
2. A major quake can cause damage far from the epicenter
According to the U.S. Geological Survey, there is a 99% chance of an earthquake over 6.7 magnitude, and a 46% chance of one greater than 7.5 magnitude, shaking California within the next 30 years. Even if your business is not located directly along a fault line, damage from a major quake can extend for many miles from the epicenter of the quake.
Are there any requirements to obtain earthquake insurance?
Some carriers may require commercial structures to undergo inspections and make repairs and/or upgrades — such as securing the building to its foundation, bracing walls, chimneys, or other masonry, as well as other structural improvements — before issuing a policy.
The bottom line on commercial earthquake insurance
When determining whether you need commercial earthquake insurance, the question to ask yourself is whether your business has the financial resources to make repairs to your building, replace damaged property within it, and continue to pay monthly bills and employees even if business operations are interrupted. If the answer is anything other than a confident “Yes,” you should contact a knowledgeable and experienced commercial insurance agent about adding earthquake coverage to your existing insurance portfolio.