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Reinforce and Insure Before the Next “Big One”

Reinforce and Insure Before the Next “Big One”

Did you know that only about 10 percent of California businesses and homeowners with property insurance also carry earthquake coverage?   While applications for earthquake coverage are usually simple to complete and submit, they are not so easy to get approved with reasonable pricing.  In order to get a quote, all that is usually needed is the age of the building/year that it was built, the type of construction, the building’s current value, and the parking configuration.  Based on the method of construction, older properties, such as concrete tilt up buildings built before 1974 and wood frame buildings built before 1980 with open parking underneath, will be quoted at higher rates.   Buildings that have gone through an earthquake retrofitting process are considered safer with less risk, therefore they generally receive a lower quote.

Commercial property owners who invest in existing properties along the West Coast often need to weigh the options between earthquake retrofit and earthquake insurance; when possible, many consider both.  Since California is a well-known seismically active area, these considerations are critical.  With the possibility of a devastating earthquake within the next 20-30 years, investors are beginning to realize that a seismic retrofit makes more sense than just paying for expensive earthquake insurance premiums that offer building structures little protection from that damage and destruction that is likely to occur.

Insurance companies base earthquake insurance premiums on the insured/replacement value of a property, not the damage loss. Depending on the property value, the premiums often run several tens of thousands of dollars annually.  In addition, most commercial earthquake policies also use the value of the property insured to determine the deductible.  Commercial property deductibles commonly range from 5 to 20 percent, therefore a  $10 million building with a 20 percent deductible would have a retention of $2,000,000.  While property owners may realize that total losses seldom happen, it is important to keep in mind the fact that most towns now require that any building sustaining more than 50 percent damage be completely torn down.  A completely new building structure will need to be constructed to meet current building codes.

A conscientious commercial property owner purchases earthquake insurance that will cover any damages caused by the “shaking” movement of the powerful seismic activity.  It is unfortunate, however, that such an insurance policy only offers assistance after the earthquake causes catastrophic devastation.  Getting the assistance needed for post-quake repairs will be difficult, as many others will likely be seeking assistance at the same time.  In addition, other costs may be incurred when a building is not structurally strong enough to withstand the forceful ground movement; other expenses could include commercial and private passenger vehicles, high valued contents/equipment, business interruption costs, debris removal, and medical costs.

So how can a commercial property owner protect their investment property before the next big earthquake strikes?  Regular maintenance and an earthquake retrofit is the answer.   A standard seismic retrofit for most buildings costs a fraction of the deductible price.  With a seismic retrofit, property owners gain the added benefits of improved safety for all tenants and employees, much less potentially spent in structural repairs, minimal or no business interruption, and minimal liability.  Additionally, with an earthquake retrofit, insurance companies will likely reduce the premium for an earthquake insurance policy because their risk is substantially less.

An earthquake retrofit is one of the best ways to make earthquake insurance affordable and possible.  The best way to estimate the amount of a reduction in earthquake insurance with an earthquake retrofit is to get a quote.  Saunders Commercial Seismic Retrofit in the Bay Area can perform a multi-faceted inspection of your property and will include a “before and after” retrofit insurance quote upon request.  By partnering with several insurance providers, Saunders can easily demonstrate the potential return on investment when performing an earthquake retrofit.  For more information on how to get affordable earthquake insurance and to request a quote for an earthquake retrofit, call Saunders Commercial Seismic Retrofit today!


Northern California Office

(408) 267-3876

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