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Affordable Earthquake Insurance Is Possible

Affordable Earthquake Insurance Is Possible

Close to 500,000 earthquakes occur around the world every year.  About 100,000 of those earthquakes can be felt, and approximately one hundred cause damage each year.  The southern California area alone experiences about 10,000 earthquakes annually, but most of them are not felt by residents.

As a San Bernadino commercial property owner, recent earthquakes around the world may have you thinking twice about earthquake insurance.  The big question to ask is this: can you even get insurance coverage for your building?  Most people believe that California residents and commercial businesses are required to have earthquake insurance.  Due to the geographic proximity to the many fault lines throughout the state and frequent seismic activity, that is understandable.  Unfortunately, however, only 12% of property owners in the state are able to secure affordable earthquake insurance. Cost is certainly one important factor that turns many property owners away; inability to even get coverage is another big issue.

Earthquake insurance in California comes at a high premium.  Especially when the economy is struggling, many property owners choose not to take on the extra expense of this type of insurance.  Even with coverage, the earthquake deductibles are high and the amount of coverage is usually not enough to fully cover the potential damage costs.  Commercial property owners should take into consideration the following information as they determine what steps need to be taken to protect and strengthen their buildings:

  • Scientists believe that the West Coast is long overdue for “The BIG ONE” – a magnitude 8 or 9 earthquake.
  • Earthquakes are the most expensive natural disaster from which to recover.
  • Engineering and construction technology have greatly improved over the last twenty-five years.  Most buildings that were constructed prior to the mid-eighties are not likely to meet current state and local building codes.
  • Property owners are still responsible to pay off the balance of a mortgage, even if the property is damaged or destroyed.

When considering earthquake insurance for financial protection in California, the real question is whether or not there is a way to get accepted for coverage with affordable rates.

Building safety and PML (Probable Maximum Loss) ratings are extremely important to lenders.  Banks and financial institutions, including insurance companies, are primarily concerned with reducing the amount of risk they carry.  The good news is that lenders who request a PML of less than 20% are usually satisfied when a professional seismic retrofit has been completed.  When a commercial property has gone through a seismic retrofit, lenders typically feel that measures are in place to reduce the likelihood of catastrophic damage and destruction that would cause the property owner walking away from their loan.

It is entirely possible that insurance companies may choose not to write coverage for earthquakes in the future due to extreme losses in the past on insured buildings.  Insurance rates have increased considerably in the last 10-15 years and often insurance companies deny coverage altogether.  The PML rating is often very high on older buildings due to construction methods used at the time they were built.  Experts expect that many older buildings will fail in the event of a strong quake, without being strengthened with a seismic retrofit.  For instance, statistics have shown that un-reinforced masonry buildings fail more than any other type of building during an earthquake.  When commercial building owners do not schedule their property for a seismic retrofit, any number of issues can occur when the earth rocks and rolls.  Not only will the building potentially collapse, the resulting damage could impact neighboring properties.

A seismic 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 a seismic retrofit is to get a quote.  Saunders Commercial Seismic Retrofit in San Bernadino 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 a seismic retrofit.  For more information on how to get affordable earthquake insurance and to request a quote for a seismic retrofit, call Saunders Commercial Seismic Retrofit today!

Southern California Office

(949) 646-0034

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