Your Weekly Cup of Joe (Buick) – Business Insurance Blogger, Client Executive
If your commercial insurance policy is un-endorsed it probably does not include coverage for damages from an earthquake. Michigan and the surrounding region are not in an earthquake prone area. Sure, from time to time we will feel a tremor, or read about an event that occurred that we may not have felt. Because of this fact, earthquake insurance is generally not a costly option to include with you commercial insurance renewal. Damage from a August 2011 event centered in parts of Virginia were estimated to be $200 million to $300 million on the East Coast, based on estimates from EQECAT, a firm that helps insurers determine catastrophe risks. This includes losses for homes and business. Often times, the damage from a quake is not the total collapse of building variety, but the ground shifting with major foundation damage kind. These can be VERY expensive to repair.
When asking for the earthquake option from your agent, be prepared for a sublimit to be offered. Generally speaking, carriers will offer sub-limits of $5,000,000 to $10,000,000 depending on certain underwriting criteria. You may be familiar to this sub-limit approach when dealing with Flood Insurance with your commercial insurance agent. Also, deductibles for earthquake coverage would generally be higher than your standard property deductible. It is not unusual to have a deductible of $25,000 or higher for a commercial property policy. You may also see a “percentage” deductible. For example, the carrier will ask the client to fund 10% of a given loss.
Rates for earthquake coverage are based on the zip code, construction, # of floors, structures on the roof, occupancy or type of commodity stored – ( glass would be a high hazard occupancy), and sprinkler system (wet or dry) among other factors. Business Interruption insurance is normally included in the sub-limit that is offered. If you are able to attain a $10,000,000 earthquake sub-limit, this would be inclusive of loss of income exposures that should be taken into account. Business interruption claims can represent up to half of a loss in cases of earthquakes.
Because earthquakes can occur, and the insurance cost is relatively low in our area, it may be prudent to consider this option. Has your agent discussed earthquake insurance with you?
Joe Buick, CIC, CRM