Does my business need commercial earthquake insurance? This type of business insurance policy offers coverage beyond your basic property policy by covering earthquake damage to your building and your business contents like computers, furniture and inventory.
Commercial Earthquake Insurance
Mother Nature is a powerful and uncontrollable force. Of all the natural events that occur, earthquakes are among the most destructive.
While commercial property insurance will cover several types of natural events, it doesn't offer protection against earthquakes - in fact - policies specifically exclude them.
If your business is located in an area that is prone to earthquakes, it's vital that you shield yourself from the damage that this natural phenomenon can cause by purchasing a commercial earthquake insurance policy.
What Does Commercial Earthquake Insurance Cover?
Commercial earthquake insurance is a specialized policy that covers the damage associated with ground movement caused by earthquakes. Generally, these policies will cover the following:
- Structural damage caused by seismic activity.
- Property damage caused by an earthquake, such as commercial equipment and machinery, as well as inventory.
- Demolition costs.
- Depending on the insurance provider, a commercial earthquake insurance policy may also cover loss of income that an earthquake can cause.
Coverage begins when the damage has exceeded your policy's deductible. Business earthquake insurance policies often have high deductibles, which typically range anywhere from 2% to as high as 20% of the value of your building - based on its location, age and condition. It's important to check with your insurance broker to find out exactly what your policy will cover.
What Commercial Earthquake Insurance Doesn't Cover
While earthquake insurance does cover a wide range of damages that are associated with seismic activity, it doesn't cover everything. Some things that your policy won't protect include:
- Vehicles that are damaged by an earthquake. Find out if your commercial auto insurance policy will offer coverage for earthquake damage, or if you can add extended coverage for earthquake damage.
- Earthquakes that are made by humans are not covered by commercial earthquake insurance. Fracking is an activity that is often leads to movement in the earth. Since this earth movement is man-made, your commercial earthquake insurance policy will not cover it.
Following is some example language from a real commercial property policy for earth movement including the earthquake exclusion: Earth Movement - (1) Earthquake, including any earth sinking, rising or shifting related to such event; But if Earth Movement, as described in Paragraphs (1) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.
Why Should You Invest In Commercial Earthquake Insurance?
For business owners who operate in areas that are prone to seismic activity, commercial earthquake insurance is a wise investment for the following reasons:
- A standard commercial property insurance policy will not cover the damage caused by an earthquake. Even if your property insurance policy offers coverage for fire damage, and you also purchased a commercial flood insurance policy - they will not pay for damage caused by fires or floods that are associated with earthquakes.
- Earthquakes can cause severe damage. This damage can span far away from the epicenter of the quake. That means that even if your company isn't situated near a fault line, a major earthquake can still do significant destruction.
Who Should Buy Commercial Earthquake Insurance?
The US Geological Survey reports that earthquakes have occurred throughout 39 states since the year 1900. Though earthquakes may not be common in certain areas, fault lines are located everywhere, which means that seismic activity can happen any place and at any time. This means that if one does occur and your business is damaged as a result, you could be looking at serious losses.
Following are some basic questions to ask yourself about your business to determine if you need commercial earthquake insurance:
- Can your business replace your business property like inventory, computers etc... if they are damaged or destroyed?
- Can your business afford to pay for temporary relocation and other expenses if structural damage makes your business location uninhabitable?
- If you own your building, can your business afford the cost of rebuilding or repairing it if it damaged or destroyed?
With all of that being said, commercial earthquake insurance is something that all business owners - no matter where they operate - should consider. However, organizations that are located in areas that are particularly prone to earthquakes, such as California and Oklahoma, should definitely invest in this type of insurance coverage.
How Much Does Commercial Earthquake Insurance Cost?
The cost of commercial earthquake insurance varies. Different insurance providers offer different prices and coverage options. Furthermore, there are several factors that will impact the cost of this type of policy, such as how close your business is to a fault line, the history of seismic activity in your area, the size of your business, and the type of equipment and machinery used in your operation. To find out how much a commercial earthquake insurance policy will cost, speak to a broker who works with a reputable insurance company that offers this type of coverage.
Commercial Earthquake Insurance - The Bottom Line
We hope this article on commercial earthquake insurance was informative. If you are trying to determine if business earthquake insurance is something that your company needs, ask yourself if you have access to the financial resources that may be necessary in order to make repairs to your business should an earthquake occur? If your answer is 'no' or you aren't sure, then you should seriously consider investing in this type of coverage. It's far better to have the protection available because there is no way to accurately predict when and where an earthquake will occur.