All about earthquake insurance

Potential apartment building owners occasionally ask me about earthquake insurance, which is not included in a standard property insurance plan. It’s kind of scary for owners with commercial mortgages, because recourse loans require you to pay up, even in the event of the building being seriously damaged or destroyed.


I’ve never bought EQ coverage on any of my properties, mostly because of a vague sense that it was unaffordable (and because we don’t use recourse leverage). But I thought I’d dig into this a little to learn for myself and for you, my dear readers.


I therefore arranged to interview John Place, from Winston Insurance via email. I met John when I was buying my first deal and realized literally on the day of closing that I had not arranged any insurance coverage. In a panic, I called him because he had arranged coverage on the building for the previous owner. John got us covered that day, which was amazing. And he’s had all my business since.


He doesn’t know this (well, now he does!), but I occasionally shop around to see if his quotes are legit and no one has ever beat him by a material amount.
That said, here’s the interview:


Can you get earthquake insurance for a 4 to 12 unit apartment building in Los Angeles?


Commercial earthquake insurance is available for habitational risks of four units and up, however, some carriers have a minimum requirement of five units.


Is there a good way to estimate the cost based on the number of units or the square footage? (Would appreciate as much detail as possible on this one.)
There are many risk factors underwriters consider to determine pricing; they include the buildings age, construction type, location, if its secured to the foundation, the total insured value, etc.  The biggest price determinant being what EQ zone the property is located in.


Do you sell much earthquake insurance to LA apartment building owners? Why or why not?


We insure quite a few clients with multiple unit dwellings.  While the potential catastrophic damage that may occur from an earthquake is a concern for most of our clients, it does not appear to be a strong motivator for acquiring earthquake coverage.  For many, the cost is prohibitive.  I also believe the longer we go without a major earthquake the less important the coverage seems to be.
Is there anything in particular a building owner should know before he goes shopping for earthquake insurance?
An owner should understand that the decision to obtain coverage is a personal one.  There’s no right or wrong answer…the coverage is not required by law.  Earthquakes are inevitable, however, they’re unpredictable in both their magnitude and destruction.  The decision to obtain coverage is simply a matter of affordability and ones own risk tolerance.
Can you give me a ballpark quote on earthquake coverage the following building:
  • 8 units
  • 4800 sq ft
  • Zip code 90026
  • 1960s
  • Stick / stucco construction
  • No tuck-under parking
  • Rents of $1,000 / month each, so $96,000 / year
Including loss of rents of $96,000 for the example given and depending on the deductibleselected; the pricing  ranges from $0.74 /$100 of property value ($8,100 pure premium at 15% deductible) to $1.12/$100 of property value ($12,300 pure premium at 5% deductible).


The insurer  would then add taxes/stamp fee (3.25% of premium) and any inspection/policy/broker fees to the premium.


These property rates may fluctuate slightly from carrier to carrier.

If someone wants to buy insurance through you, how should they get in touch with you?
For a quote [MK: on EQ insurance or any other type], I can be reached at 909.581.7218, or email me at