Earthquakes in California are common occurrences as the state is located on the San Andreas Fault. There are hundreds of other active faults located throughout the state and they are all capable of producing large earthquakes. In fact, seismologists are saying that the west coast is long overdue for an earthquake that will measure 8 or 9 on the Richter scale. Most people in the United States believe that California residents and commercial property owners carry earthquake insurance, especially since so much of the state is located on or near fault lines. Amazingly, only 12% of those who own residential or community property in California manage to get affordable earthquake insurance. Cost is a major factor to contend with, however denial of coverage is the other major issue.
Earthquakes will always be a concern for California residents, especially since they are the most expensive disaster from which to recover. Earthquake insurance in California comes at a high premium and many property owners simply choose not to add this extra expense, especially in these tough economic times. If you are lucky enough to get earthquake insurance, the deductibles are quite high. In addition, the amount of coverage often doesn’t completely cover the potential cost of damage or complete property loss.
There are two important points to consider if you live in California, especially in close proximity to a fault line, and you are considering earthquake insurance for your commercial property:
- Buildings that are older than 10 years are most likely not up to the current, more strict, building codes
- You are still responsible to pay off the balance of a mortgage, even if the property is damaged or destroyed
So the question is this: is there a way to get accepted for coverage with affordable rates?
If you have ever looked to get financing on your commercial property, you may have heard about the importance of building safety and the PML (Probable Maximum Loss) rating for lenders. Most financial institutions, including banks and insurance companies, are always concerned with minimizing the amount of risk they carry. If you have a commercial property that is more than 10 years old, it is very likely that the building is not strong enough, as is, to withstand the force of a strong earthquake. Fortunately, a substantial number of lenders, who require a PML under 20%, are typically satisfied when a comprehensive and professional earthquake retrofit has been done to strengthen the building. An earthquake retrofit assures the lender that necessary reinforcements are in place to reduce the chances of catastrophic damage and devastation that would most likely result in the owner walking away from their loan.
In the future, insurance companies may decide not to write coverage for earthquakes due to past losses and other events. Rates have increased 3 to 6 times since 2005 and policy denial is often the norm. Many property owners are carrying an overly high PML on older buildings. These older commercial properties were constructed in ways that experts now expect to fail if a powerful quake occurs. An earthquake retrofit is one of the best ways to protect your property and to make earthquake insurance possible and affordable.
If you are trying to determine if an earthquake retrofit is a solid investment and also the best way to reduce the cost of earthquake insurance, you will want to get a quote. Saunders Commercial Earthquake Retrofit provides property owners an insurance quote based on present and after-retrofitting values so clients can easily calculate their investment return. By partnering with a number of insurance providers, Saunders can easily demonstrate the potential return on investment. The bottom line is that it’s a lot more inexpensive and safe to earthquake retrofit a structure prior to an earthquake than to fix costly damages afterward. For additional information on the best ways to get affordable earthquake insurance and to get a quote for an earthquake retrofit for your commercial property, call Saunders Commercial Earthquake Retrofit today!
Southern California Office