Earthquake Insurance: Don’t Get Caught Off Guard

Lately, Southern California has been rocking with small earthquakes. Luckily they have been small, rolling quakes for the most part, but every time they strike, they scare the crap out of people two reasons: for one, they come out of nowhere, and second, they make people brace themselves in fear that they’ll grow stronger and more violent.

A third reason why earthquakes are scary is often overlooked and unknown to many. That reason is: standard property insurance policies exclude coverage for damages resulting from earth movement, including earthquakes. So, if your home or business is destroyed in an earthquake and you don’t have a separate earthquake insurance policy, you’re out of luck.

In order to cover your home or business for earthquake damage is to purchase a separate earthquake insurance policy. Earthquake insurance covers a building and its contents, but inevitably includes a large percentage deductible on each. Even if you don’t own a building or structure, but have high value contents and possessions like stock or merchandise, you might want to consider earthquake insurance. In California, most policies are sold by the state-run insurance pool, the California Earthquake Authority (CEA), although a few private companies also sell earthquake coverage.

To determine if earthquake insurance is right for you, or how much coverage is right for you depends on your individual circumstances.  The following questions may help you decide:

• Can you afford to replace your business possessions (such as stock, merchandise, furniture, computers/media, and general equipment) if they were destroyed in an earthquake?  How much would they cost?
• If you have to find temporary accommodations because you cannot operate at your business location as a result of an earthquake, how much will you need to pay for those additional operating expenses?
• If you own a commercial building, how much home equity do you have?  Can you afford to risk losing that equity if an earthquake damages or destroys it?
• How much would it cost to rebuild?  Do you have assets available to repair or even rebuild your building after an earthquake?
• Do you have a mortgage, second mortgage, or line of credit on your commercial building?  Can you afford to continue repaying those loans while also paying to rebuild or replace your structure?

Earthquakes are surprising enough when they strike. Don’t get caught off guard by your insurance policy coverages and exclusions after it’s too late. Be prepared!