Taking the pro-active approach
Earthquake insurance is necessary because earthquakes in California are a fact of life. Most homeowners and commercial property policies exclude coverage for earthquake damage and earthquake sprinkler leakage. If you own a home, apartment building, office, industrial or mercantile property in California, you need to consider purchasing earthquake coverage. Because earthquake insurance is a type of catastrophic coverage, most policies are high deductible, usually from 5-15 percent of the coverage you purchased. Generally older properties cost more to insure than new, wood frames buildings have lower premiums than brick, due to the flexibility of the structure.
How much earthquake insurance coverage should you buy?
When estimating the size of an earthquake insurance policy, remember that you should purchase enough to cover the cost of completely rebuilding your property. These costs should be based on replacement and reconstruction costs, up to building code levels, not the fair market value of your property.
For some property owners, earthquake insurance is essential. For others it carries an unnecessary expense. Earthquakes are unpredictable; however, what would the impact be on your cash flow if you were not prepared? How much could you afford to lose?