The Coverage Gap
Here's something that surprises many building owners: standard property insurance does not cover earthquake damage. In California, where seismic risk is a fact of life, this exclusion creates a significant coverage gap.
Understanding Earthquake Insurance
Earthquake insurance is a separate policy (or endorsement) that covers:
- Structural damage from ground shaking
- Damage from landslides triggered by earthquakes
- Fire following an earthquake (though this is often covered by standard policies)
- Additional living expenses or loss of rent during repairs
What It Costs
Earthquake insurance premiums in California vary dramatically based on:
- Location: Proximity to fault lines
- Building age: Older buildings cost more to insure
- Construction type: Wood frame vs. masonry vs. steel
- Foundation: Bolted foundations reduce premiums
- Retrofit status: Seismic retrofits can lower costs significantly
For a typical multifamily building in Los Angeles, expect to pay between $3-8 per $1,000 of coverage annually. A building with $2 million in coverage might pay $6,000-16,000 per year.
The Deductible Reality
Earthquake policies have high deductibles — typically 10-20% of the building's insured value. For a $2 million building, that's a $200,000-400,000 deductible.
This means earthquake insurance is really designed for catastrophic losses, not minor damage. You'll pay out of pocket for smaller claims.
Is It Worth It?
Consider earthquake insurance if:
- Your building has significant equity
- You have a mortgage (lenders may require it)
- You couldn't afford to rebuild without insurance
- Your building is in a high-risk zone
You might skip it if:
- You have substantial liquid assets to self-insure
- Your building is fully depreciated for tax purposes
- The premium-to-coverage ratio is unfavorable
Reducing Your Risk
Whether or not you buy earthquake insurance, consider:
- Seismic retrofitting: Bolting the foundation, adding cripple wall bracing, and securing water heaters
- Building inspection: Know your building's vulnerabilities
- Emergency reserves: Set aside funds for earthquake deductibles or self-insurance
- Tenant communication: Have an earthquake preparedness plan
Getting Quotes
Earthquake insurance is available through:
- California Earthquake Authority (CEA) for residential properties
- Private insurers for commercial properties
- Surplus lines carriers for hard-to-place risks
We work with multiple earthquake insurance providers to find the best combination of coverage and cost for your specific property.
Want to explore earthquake coverage options? Contact us for a no-obligation quote.