Earthquakes are not as common in Texas as in states like California, but seismic activity has been increasing in recent years, particularly in West Texas. Business owners may wonder whether their commercial insurance policies cover earthquake-related damages. Understanding your coverage options is crucial for protecting your business assets.
Standard Business Insurance and Earthquake Damage
Most standard business insurance policies, including commercial property insurance, do not cover damages caused by earthquakes. If an earthquake damages your business property, equipment, or inventory, you may be responsible for all repair and replacement costs unless you have additional coverage.
Purchasing Earthquake Insurance for Your Business
To protect against earthquake-related losses, businesses must purchase a standalone earthquake insurance policy or an endorsement (rider)added to an existing commercial property insurance policy. These policies typically cover:
- Structural damage to buildings
- Business equipment, inventory, and furnishings
- Business interruption expenses if the earthquake forces a temporary closure
Business Interruption and Earthquake Coverage
Business interruption insurance is created to cover lost income and ongoing expenses when a company is forced to shut down because of a covered peril. However, standard business interruption insurance does not apply to earthquake damage unless you specifically add earthquake coverage. Without this endorsement, businesses may struggle with financial losses due to downtime.
Evaluating Policy Costs and Deductibles
The cost of earthquake insurance for businesses varies based on:
- The location of your business and its proximity to fault lines
- The age and construction type of your building
- The coverage limits and deductible you select
- Earthquake insurance deductibles tend to be higher than those of standard commercial policies, often ranging between 5% and 25% of the insured property value.
Steps to Take for Coverage
If you own a business in Texas and want to protect against earthquake damage, follow these steps:
- Review your current policy – Contact your insurance provider to check if earthquake coverage is included or can be added.
- Compare earthquake insurance options – Look for standalone policies from specialized insurers if your provider doesn’t offer an endorsement.
- Assess your risk – Consider the seismic activity in your area and the structural integrity of your business property before purchasing coverage.
Conclusion
Without specific earthquake insurance, businesses in Texas may be left vulnerable to significant financial losses. Business owners should carefully evaluate their policies, consider the risks, and explore earthquake coverage options to ensure comprehensive protection against seismic events.