In August 2014, a 6.0-magnitude earthquake hit California’s Napa Valley. Vineyards and businesses in the fabled Northern California wine country suffered more than $80 million in damage.
Andy Hendrix, Colony Specialty’s senior vice president of underwriting, says there are many cases in which commercial business owners or residential homeowners either do not buy earthquake coverage or purchase limits insufficient to cover their exposure.
The risk isn’t just in California, either – earthquakes strong enough to damage buildings can occur in the Pacific Northwest, Missouri, Tennessee, Arkansas, Illinois, Kentucky, Mississippi, Alaska, Hawaii and even South Carolina.
Here are a few of Hendrix’s suggestions for businesses considering earthquake insurance:
- Think about your needs: Insurers exclude earthquake damage from many businesses’ policies unless they specifically purchase earthquake insurance. As a result, Hendrix says, many businesses can’t bounce back financially after earthquakes.
- Take your workplace and assets into account: Different kinds of businesses have different needs. Before choosing a policy, speak with your insurance representative to find out how your store, office, industrial facility or outdoor location is covered.
- Keep track of pricing and deductibles: According to Hendrix, pricing and deductibles for earthquake insurance vary widely by geographic region. Outside of California, pricing is usually much lower and deductibles more favorable. In general, earthquake rates are at historic lows due to relatively infrequent U.S. earthquake activity.
- Understand your coverage: Find out whether perils such as mudslide, landslide, mine subsidence, sinkhole collapse, or tsunami are covered or excluded from your coverage.
- Consider the secondary benefits: Services such as Colony Specialty’s earthquake insurance can make it much easier for businesses to receive bank loans and government funding. In certain earthquake-prone areas, banks may even require commercial loan recipients to have earthquake insurance.
- Be vigilant about changes to earthquake zones: Seismic activity has increased dramatically in certain areas. For example, the number of earthquakes in Oklahoma measuring 3.0 magnitude or greater increased from two in 2008 to nearly 890 in 2015, according to U.S. Geological Survey statistics.
There’s one final reason for businesses to consider earthquake insurance: Unlike flooding or tornados, earthquakes are a year-round risk and can happen anywhere.