How does earthquake insurance work for apartment buildings?

Earthquake insurance is a standalone policy or endorsement that covers damage to apartment buildings from seismic events, including earthquakes, aftershocks, and related phenomena such as landslides triggered by seismic activity. Standard commercial property policies exclude earthquake damage, so a dedicated policy is required. The ISO Earthquake endorsement (CP 10 40) can be added to a commercial property policy, though many insurers write earthquake coverage through specialty markets or separate standalone forms.

Earthquake policies typically use a percentage-based deductible rather than a flat dollar amount. Deductibles of 5% to 15% of the total insured value are common. For a building insured at $5,000,000, a 10% earthquake deductible means the owner pays the first $500,000 of earthquake damage out of pocket. Because of these high deductibles, earthquake insurance is generally used to protect against catastrophic losses rather than moderate damage.

The cost of earthquake insurance depends on the building's location relative to known fault lines, the construction type (wood frame, masonry, reinforced concrete), the age of the building and whether it has been seismically retrofitted, the soil type at the site, and the coverage limits and deductible selected. Premiums vary dramatically by region. Properties in high-seismicity zones may pay several times more than comparable properties in areas with low seismic activity. In California, the California Earthquake Authority (CEA) is the primary provider for residential earthquake coverage, while commercial apartment properties typically obtain coverage through the surplus lines or specialty market. Some municipalities have enacted mandatory seismic retrofit ordinances for older apartment buildings, such as Los Angeles's Ordinance 183893, which requires soft-story apartment retrofits.