It is interesting that, unlike most other natural disasters, earthquakes are sneaky and come without warning. They can creep up on us and then the ground begins to gyrate; buildings and people become victims of violent, frightening shaking. Avalanches, landslides, flash floods and other hazards often follow moderate to severe earthquakes, which makes them among the most feared and costly natural disasters.
In California, where nearly all homes face earthquake threats, a surprisingly small share have specific coverage. To learn more about options for homeowners and families, see California Earthquake Insurance: Protecting Your Home and Family from the Unthinkable. Many businesses — including startups and home-based businesses — also face exposure, and a standard homeowner’s insurance policy does not cover earthquake damage, nor do most standard businessowners policies or business property policies.
The 1994 Los Angeles-area earthquake lasted only seconds but caused widespread destruction. Dozens of people died and thousands were injured, and property damage exceeded $20 billion, making it one of the most expensive natural disasters in U.S. history.
Aftershocks often follow a large quake and, on their own, can cause additional damage for days or even months.
The Earthquake endorsement
Because most standard business insurance policies exclude earthquake losses, there are two common ways to get coverage: an endorsement added to your existing business policy, or a separate earthquake policy. For a general overview of what earthquake insurance covers, see What is Earthquake Insurance?.
Endorsements are issued by your current insurer and may be the simplest option for many small businesses. In some states there are also shared or state-supported programs that work with private insurers to make coverage more available.
Additional separate policy
Purchasing a separate earthquake policy can make sense for larger companies or for firms that want higher limits and specialized terms. Keeping some cover with your primary insurer and buying excess coverage from another company is a common strategy; learn more about extra layers of protection at Excess Earthquake Insurance: The Hidden Armor Your Business Needs.
However, managing multiple policies across different carriers can be more complex for new or small businesses, so weigh the trade-offs carefully.
The best way to find the right balance between premium and protection is to review your exposure with a licensed insurance professional. Meet with your independent business insurance advisor and, if you prefer, talk to an agent who can explain the options and cost per $1,000 of coverage for your property.
Frequently Asked Questions
Does a standard homeowners or business policy cover earthquake damage?
No. Most standard homeowners and business insurance policies exclude earthquake damage; you need an endorsement or a separate earthquake policy for that coverage.
What is the difference between an endorsement and a separate earthquake policy?
An endorsement adds earthquake coverage to an existing policy under that insurer’s terms, while a separate policy stands alone and can offer different limits and deductible options.
Are aftershocks covered by earthquake insurance?
Yes. Aftershocks related to a covered earthquake are typically considered part of the same event and would be handled under the same earthquake coverage, subject to policy terms and deductibles.
How can a small business decide which option is best?
Discuss your property values, business interruption exposure, and budget with a licensed agent to compare endorsements, separate policies, and excess coverage options.