Why Insurance Alone Won’t Protect You in a Major Earthquake

Why Insurance Alone Won’t Protect You in a Major Earthquake

By |2018-01-12T00:08:41+00:00November 14th, 2017|Earthquake Protection|

Nobody should ever be caught without insurance. It’s an essential tool to guard against excessive risk associated with our automobiles, our property, our health, even our lives.

But it’s important to note that while insurance may help to cushion the blow of an accident or worse, it does nothing to prevent these adversities from occurring.

Evaluate Your Options

There are four options available to property owners, each with their own pros and cons:

  • The “Do-Nothing” Approach

  • Purchase Insurance and Don’t Get a Retrofit

  • Invest in a Retrofit and Don’t Get Insurance
  • Retrofit Your Property and Get Insurance at a Discount

Do Nothing:

Few people would argue that Option 1 – the do-nothing approach – is a good one to follow. Seismologists warn that a major quake – one with the force to rip along the San Andreas fault and displace it by an average of 9 feet – is long overdue. This looming 7.8-magnitude earthquake in Southern California would result in more deaths and nearly twice the damage as the 1994 Northridge earthquake to area infrastructure, including buildings, critical transportation, power and water systems.

Insurance Only:

Option 2, to purchase insurance without a retrofit, is better. Depending on the level of coverage you buy, it can cover all or part of the damage to your building, damage to the contents of the building, and in certain instances your policy can also include coverage for income lost if your building becomes uninhabitable. This latter option, covering lost rent, can be extremely expensive, but many property owners depend on that income for their livelihood or retirement.

When weighing your options, it’s important to factor the cost of deductibles which can be as much as 15 percent of the value of a building. For a million-dollar structure, that would require $150,000 out-of-pocket before you could even start to collect on your policy.

A precedent has been set, making building owners liable for death and injury in an earthquake through negligence – provided they knew their building was at risk of seismic failure. In a case in the Paso Robles quake of 2003, two employees of a clothing store were crushed to death by falling bricks and plaster as they ran out of a building that had been ordered by the city to be seismically retrofitted, but the deadline to do it had not yet passed. A jury awarded the families of the women $2 million, finding the building owner negligent because he knew the building was at risk of collapse, even though the structure was technically still in compliance with the law.

Retrofit Only

Option 3, to invest in a retrofit and not get insurance, represents a tangible step toward preventing damage or injury in a major earthquake. Retrofits are proven to help dramatically reduce the risk of building failure during an earthquake.

Many insurance carriers recognize this and will not provide earthquake coverage to vulnerable buildings that do not have retrofits. Those that do will usually reduce premiums for buildings that have been retrofitted because the risk is so much less.

The University of San Diego Jacobs School of Engineering conducts ongoing studies on the effects of retrofits on a variety of buildings, using one of the world’s largest shake tables. Their findings are that retrofits can not only help to prevent a building from falling, but they can also to keep them habitable after a quake. Visit www.jacobsschool.ucsd.edu for more information.

Retrofit and Insurance:

Option 4, to get a retrofit and earthquake insurance, does the most to protect a property owner.

This is by far the safest option. A retrofit helps to secure the building and minimize damage and loss. Insurance helps to keep building owners covered in the event of damage, and the coverage can include loss of content, damage, liability and more.

Earthquake insurance is becoming increasingly popular and affordable, with a variety of options to help meet the needs of property owners. Many carriers offer higher deductibles, blanket insurance on multiple properties, or limited coverage options to keep monthly premiums to a minimum.

If you’re interested in learning more about options, Optimum Seismic has teamed up with the Apartment Association of Greater Los Angeles to host informational seminars to educate building owners about the law, the typical retrofit process along with information about financing, risks and liability and tenant habitability plans.

Our next seminar will be at 6 p.m. Wednesday, Nov. 15, at AAGLA Headquarters, 621 S. Westmoreland Ave., Los Angeles. Please RSVP to AAGLA at 213-384-4131 or call Optimum Seismic at 323-OPTIMUM.

About the Author:

Ali Sahabi
Ali Sahabi has been a licensed General Engineering Contractor (GEC) since 1993, and is a principal at Optimum Seismic, Inc. He has completed hundreds of seismic retrofitting and adaptive reuse projects for multifamily residential, commercial, and industrial buildings throughout California.

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