The possibility of an earthquake affecting BC is a very real threat. Being in the Cascadia Subduction Zone, a subduction quake could be devastating. There are steps you can take to prepare your home and minimize the potential damage. The Government of Canada provides an emergency preparedness guide. Beyond those preparations, including earthquake insurance as part of your current homeowner policy is essential.
It is important to understand how earthquake insurance works. First of all, earthquake damage is not always covered by a standard home insurance policy – you must add this coverage onto your policy. Earthquake insurance covers loss and damage to both your home and possessions due to an earthquake (shaking of the earth), in addition to out-of-pocket living expenses following an earthquake. Owners of strata units should discuss Earthquake Loss Assessment coverage with their broker as they could be responsible for paying a portion of the strata’s earthquake deductible.
Separate Deductible
Earthquake insurance carries a separate deductible (the amount you pay should a claim occur) from your other insurance. This deductible is affected by a number of things including your location and limits of insurance. Earthquake deductibles are much higher than a standard home policy deductible would be, typically applied as a percentage of insured vales.
Further, given the potential for a catastrophic earthquake in the Lower Mainland, and increased regulatory pressure on insurance companies to increase their capital reserves, all insurance companies require significant earthquake deductibles for strata corporations. It is important to understand how the strata earthquake deductible is applied. The deductible is applied as a percentage, typically 10% to 15%, of the insured property value and not as a percentage of the loss amount.
Example:
Strata’s Current Insured Property Value: $20,000,000 (one building)
Earthquake Deductible: 15%
Strata Earthquake Deductible: $3,000,000.
Number of Units: 100
Potential Loss Assessment per Unit Owner: $30,000
It is imperative the strata corporation is able to fund the deductible in order to repair or rebuild. Earthquake deductible buy-down products are available for strata corporations.
For more information and resources, please contact an Acera Insurance strata risk advisor.