Commercial Insurance for Earthquake
Commercial insurance for earthquake insurance usually can be issued as a stand-alone policy or it can be issued as an endorsement to the commercial property policy or it can be part of the coverages within the DIC policy which is the Difference In Conditions policy. Usually the timeframe for earthquake is extended to include the primary earthquake as well as tremors and aftershocks that ensue. Some earthquake coverages can be extended to encompass losses about one week after the first earthquake happens and included it all as one loss.
Otherwise, if each tremor or aftershock is triggering a separate deductible it can cause great financial hardship on the insured. The reason being is the deductibles and coinsurance clauses tend to be very high on this type of coverage. Sometimes you can narrow the earthquake coverage via endorsement on your property policy to cover such things specifically as earthquake sprinkler leakage coverage. This option is usually chosen by many insureds as they are normally not concern about earthquake damage so much as the damage sprinklers will do to their personal contents as a tenant in the building.
Normally the coinsurance provision with regards to insuring to value does not apply under the earthquake coverage provisions. You can typically choose whatever limit that you desire and insure for that amount. Even though the earthquake my start a fire or cause a tidal wave, etc., you still need those coverages in place as this policy typically won’t cover those kinds of losses.
Earthquake insurance is usually written with a percentage as a deductible versus a dollar amount. So if you have earthquake insurance for $1 million with a 10% deductible and you had a total loss your deductible would be $100,000. Many times earthquake insurance is added to a builders risk policy before his construction begins and continues thru the life of the construction project. Clearly the values at risk on day one are much lower than the values of the risk at the end of the project. Therefore, the premiums for earthquake insurance are promulgated based on the completed value with the premiums discounted over the life of the project. Usually builders risk insurance that includes earthquake insurance is on reporting form basis. This means that you must periodically, which could be monthly or quarterly depending on the length of the project, report accurate volumes of the project as it is completed. Failure to report the values timely and accurately will usually result in coinsurance penalties if there was a claim during this period of reporting. On some earthquake insurance policies you can also include business income and extra expense as part of the coverages in addition to the building damages of the property that you’re insuring from earthquake damage.
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