Every commercial property policy written in California excludes earthquake. The building, the tenant improvements, the inventory and the income the property produces are all uncovered for the shaking. Commercial earthquake insurance is a separate purchase, and for a growing share of buildings the lender requires it. We place it in the admitted and surplus markets, sized to your PML and the loan covenant, not past it.
Send the address, values, year built, construction type, any PML report and the lender's requirement. We quote the market and structure to the covenant.
Many commercial lenders, especially on larger loans, CMBS loans and loans on older buildings, require earthquake insurance as a loan covenant. Some tie the requirement to the building's PML score. If you are refinancing this year, expect the question.
No lender to force the issue, just the math. A free-and-clear building is concentrated equity sitting on California soil. The owners who buy voluntarily are the ones who have worked out what a red-tagged building does to the balance sheet and to the tenants' leases.
The landlord's earthquake policy, if there is one, covers the building. It does not cover your improvements, equipment, inventory or the income you lose while the space is unusable. Businesses with a significant build-out in an older building carry real, uninsured exposure and usually do not know it.
Commercial-scale placements for associations are their own specialty. When an association goes bare, the loss-assessment exposure lands on every unit owner. We write the master policy and the unit-owner side.
Deductibles are percentage-based, typically 5% to 25% of the covered values, and apply per unit of coverage. Larger schedules are commonly placed in layers or shared among carriers.
Probable Maximum Loss is an engineering estimate of the share of the building's value a major earthquake would destroy. Underwriters and lenders read it the way a bank reads a credit score.
Post-1994 steel or wood-frame buildings score well. Tilt-ups with unretrofitted roof-to-wall connections, non-ductile concrete and unreinforced masonry score badly, sometimes uninsurably at standard terms.
Retail or parking at ground level with rigid floors above. Los Angeles, San Francisco and other cities now mandate the retrofit. A completed, documented retrofit is one of the few actions that directly cuts both the premium and the deductible options available.
Two identical buildings, one on rock and one on fill, can quote very differently. The address is part of the risk.
If your lender ordered a PML report, send it to us with the loan's insurance language. Many covenants require coverage only when PML exceeds a threshold, commonly around 20%. Quoting to the actual covenant regularly saves owners from buying more than the loan demands.
Rates are quoted per $100 of covered value and vary widely with construction, location, soil and PML. Rather than a fake precise number, these are the things that control the outcome.
Deeper reading: Commercial earthquake insurance in California, what building owners and tenants need to know.
No. Standard commercial property policies exclude earthquake damage. Coverage for the building, business personal property, and earthquake-related business interruption requires a separate commercial earthquake policy or endorsement.
Many California commercial loans, especially larger loans, CMBS loans, and loans on older buildings, include earthquake insurance covenants. Requirements are often tied to the building's Probable Maximum Loss, commonly triggered when PML exceeds a threshold around 20%.
Probable Maximum Loss is an engineering estimate of the percentage of a building's value that a major earthquake would likely destroy, based on construction type, era, soil and retrofits. Underwriters and lenders use it to set pricing, deductibles, and whether coverage is required at all.
Yes. A completed, documented soft-story retrofit lowers the building's PML, which typically reduces premiums and opens up lower deductible options. Permits and engineering documentation belong in the submission.
Usually, if they have meaningful exposure. A landlord's earthquake policy covers the building, not the tenant's improvements, equipment, inventory, or lost income while the space is unusable. Tenant earthquake coverage addresses those gaps.
Address, building values, year built and construction, any PML report, and the lender's requirement if there is one. For property, liability and workers' comp, our parent agency Jump Insurance Services handles the full commercial program.