Despite modern improvements to building codes, the damage caused by an earthquake can be truly devastating to personal and commercial property.
Particularly for those located near fault lines, the realization that next major earthquake is only a “matter of time” can be an unsettling one. Even worse, in the aftermath of a major earthquake, many discover that they are underinsured or uninsured. Of the 20 billion dollars in damage created by the 1994 Northbridge, California earthquake, only 12.5 billion dollars was covered by insurance.
Despite the severity of events like this, memory often fades and insurance policies lapse. The high cost of earthquake coverage can certainly seem prohibitive as an ongoing expense. Perhaps, for these reasons, it is not surprising that even in those parts of the country at the highest risk for seismic activity, only a small percentage of the population typically carries earthquake insurance.
Earthquakes not covered by property insurance
Damage caused by earthquakes is specifically excluded from most commercial and homeowner’s property insurance policies. As stated above, this leaves many without the coverage needed in the aftermath of an earthquake. Typically, the best remedy is to add an earthquake endorsement to your existing policy.
Premiums vary based on factors like geographic location, the type of structure insured, and distance from fault lines. Wood frame structures qualify for better rates than brick buildings because they better withstand the stresses produced by earthquakes.
Save on premiums with a separate policy.
Smaller businesses and private individuals usually prefer to purchase earthquake coverage as an endorsement to an existing policy. This negates the need for them to manage submitting multiple claims to different insurers.
Bigger businesses, on the other hand, may derive greater benefit from saving money on premiums overall. This can be achieved by purchasing earthquake coverage as part of a separate policy.
One of the most significant areas of exposure to loss in the aftermath of an earthquake is business interruption. It is important to remember that business interruption coverage is only activated in the event of a specifically covered property loss. For this reason, it is imperative that policyholders in areas at high risk for major earthquakes ensure they carry earthquake insurance in addition to their business interruption insurance.
One of the greatest contributing factors to the increasing risk of property loss resulting from earthquakes is the expanding urban development in many seismically active regions.
Modern building codes and improved building materials have attempted to reduce some of the associated risk factors, but the concentration and size many urban structures present an inherent problem. Also at increased risk are many older structures in these areas. These frequently have not been upgraded to modern building codes and are now in close proximity with other new construction.
Just because a business is not physically located in a region with a high risk for earthquakes, property and income can still be adversely affected by their occurrence.
A prime example is the March,2011 tsunami and resulting earthquake that struck Japan. The World Bank has estimated its economic cost at 235 billion dollars, making it the costliest natural disaster in history. The results were catastrophic, reaching across the globe and affecting numerous industries.
Businesses that rely on overseas suppliers, manufacturing, and transportation should be aware that earthquake coverage can also be acquired as part of a “difference in conditions” policy, designed to cover gaps in existing property insurance.
Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.