The Q&A category is where you get to ask the expert.

How come my earthquake insurance is more expensive than my next door neighbor’s policy?

Well, unlike homeowners insurance where all similar buildings in a particular area are going to have the same rates, the same is not true for commercial earthquake insurance.  Earthquake insurance it’s a whole different ballgame.  Two buildings that are across the street from each other can have extremely different premiums.  Let me give you a couple of examples.
1.     I’ve seen cases in Los Angeles where there is an underground river that runs down one side of a street and the other side of the street is sitting on top of solid soil.  The side sitting on top of the river is going to have a much higher rate than the building across the street because the soil underneath the first building is seriously inferior to the second building.
2.    Sometimes you’ll find two very similar buildings that were built just one year apart and yet have drastic rate variations. That’s because one building was constructed in the year after there was a significant change to the earthquake building codes and the other one was built under different codes.  The building built prior to the change will be pay significantly higher rates for their earthquake insurance because the guts of the building are not made to withstand an earthquake the same way the building built after the change in building codes.
Both of these can cause changes that could be 20-50% variance in the cost of earthquake insurance. It can also cause one building to be approved and another to be declined for coverage.

Our earthquake insurance is really expensive. Is there any way to lower the cost?
Depending on the size of the complex, there might be a couple of different ways to cut the cost of your earthquake insurance.

If you are a condominium association, and you are a larger association, you should be able to lower your costs significantly by strategically using CEA loss assessment coverage to replace the bottom layer of your earthquake insurance.  An owner can purchase 50,000 or 75,000 of loss assessment coverage individually from the CEA.  By the association purchasing coverage that starts in excess of the $50,000 level we can create an ability to save thousands of dollars for the association.
On smaller associations you can look to increase the deductible for the association, by doing that you are able to once again take full advantage of the CEA loss assessment coverage.  For smaller associations there a couple of obscure programs that I am able to write and most other agents can’t. This allows me to do provide solutions when other agents have none.

Why does the age of my building make a difference?
Seismic building codes change over time, and those buildings that were built prior to the change are structurally more risky than those built after the code change.  For example, 1976 is an important  year for code changes.  The 1976 Unified Building Code mandated that a building not have soft story tuck under parking (this is the type of construction used for the notorious Northridge Meadows complex) and that the building must be bolted to the foundation.  So if your building is built prior to the 1976 they will assume you do not have these safety features, and if it is built after that date they can assume it has been built to these standards.
If your building has been retrofitted and brought to a more recent building code, having proof of the improvements will make a difference on your insurance.

How is the deductible calculated on an earthquake policy?
Unlike other policies, the deductible is not expressed a fixed dollar amount. Rather, it is expressed as a percentage of the total insurable value of the complex. Subsequently, if you have a 15% deductible you will be responsible for 15% of the total insurable value of the building when the loss occurs.  That means if it costs $1,000,000 to rebuild your building, you are going to be responsible for the first $150,000 before insurance begins to pay. So if you were to end up with a total of $200,000 in damage, you would be responsible for the first $150,000 and then insurance would pay the next $50,000 of damage.