Many associations Boards of Directors often wonder if they should investigate earthquake insurance for their communities. Often times when it comes up for discussion, it is assumed that it will be too expensive, and the subject is dropped.

To fully perform their fiduciary duty, a proposal for earthquake insurance should be requested and considered.
The purchase of earthquake insurance serves to reduce the exposure a member has to assessment for the cost to repair common property damaged by an earthquake. With no insurance in place, the Association is exposed to a 100% loss and each member to a substantial assessment in order to rebuild.

There are a few ways to obtain insurance which would reduce this exposure. One way is to purchase a master earthquake policy for the association. This provides protection for the entire community and splits the cost evenly between all members. In the event of a loss, the deductible would also be split evenly between members.

Another way is to obtain an “opt-in” policy, which allows individual owners to decide if they want to participate. If there is an earthquake loss, those participating members would have access to funds to cover that large assessment. Those who did not opt-in would not.

Unit owners also can purchase an earthquake insurance policy through the California Earthquake Authority (CEA). The policy can include loss assessment coverage, but the maximum available would be $100,000. These special policies are available to unit owners through their regular homeowner’s insurance agent and can be purchased regardless of if the association has any type of earthquake coverage.

With so many options to address earthquake insurance coverage, it makes sense for every board to discuss these options with their insurance agent. Setting up a town hall meeting so the membership can also hear options is a great way for everyone to participate in the discussion and make a decision that is right for them.

If we can assist your community with earthquake insurance options, please let us know. We are here to help.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com.