Earthquake insurance for businesses: coverage, deductibles, limits

A standard commercial property policy does not pay for earthquake damage. The ISO Causes of Loss forms exclude earth movement, so a business that wants earthquake protection has to buy it separately, either as an earthquake endorsement on the property policy or as a stand-alone difference in conditions (DIC) policy. Expect a percentage deductible, usually calculated on the value of the building rather than on the loss, and expect underwriters to ask hard questions about how and where the building was built.

What the standard policy excludes, and what it still pays

The special form, ISO CP 10 30, lists earth movement among its excluded causes of loss: earthquake, landslide, mine subsidence, and earth sinking, rising or shifting. Volcanic eruption is excluded in the same clause. Broad and basic forms leave the peril out as well. (Policy language varies, and carrier-specific and manuscript forms differ, so read the one you hold. The basic, broad and special causes of loss forms: what each covers guide explains how the forms are built.)

The exclusion has a built-in exception that surprises owners. If an earthquake sets off a fire or an explosion, the standard form pays for the fire or explosion damage. Fire following earthquake is therefore covered under a policy with no earthquake endorsement at all, but the shaking damage, the cracked slab and the collapsed wall are not. After a large quake, that split is often where the dispute starts: how much of a burned building was destroyed by the fire and how much by the shaking that preceded it. The anti-concurrent causation clauses: when one excluded cause sinks a claim lead-in to the exclusion is why the sequence of events matters.

Earthquake is also not a flood peril. A tsunami or a burst water main caused by a quake falls under the water exclusion, and the standard earthquake endorsement carves out tidal wave and tsunami loss by name. Coastal buyers need Commercial flood insurance: NFIP limits and private options or a DIC policy that includes flood.

Two ways to buy the coverage

1. The earthquake endorsement. ISO's CP 10 40, Earthquake and Volcanic Eruption Endorsement, adds earthquake and volcanic eruption as covered causes of loss to the commercial property coverage part. It treats all shocks or eruptions within a 168-hour window as one event, so a mainshock and its aftershocks produce a single deductible and a single limit. ISO also publishes a sublimit version, CP 10 45, which caps the earthquake payment at a scheduled amount below the policy limit and drops the coinsurance requirement. Some carriers offer their own earthquake forms instead of ISO's, with different valuation, deductible and sublimit terms.

2. A DIC or earthquake-only policy. Surplus lines carriers and managing general agents write stand-alone earthquake and DIC policies that sit beside the primary property program. They typically carry their own limit, their own deductible and a rate built from catastrophe-model output. For buyers in California and the Pacific Northwest this is often where the capacity lives. Because these markets are usually non-admitted, the placement goes through an surplus lines broker with the state's surplus lines tax added; see excess and surplus lines insurance explained.

Brokers pick between the two on limit, price and flexibility. An endorsement keeps one carrier and one claim. A separate policy can offer a higher limit, a lower deductible on a favorable building, or capacity that the primary carrier will not provide.

How the deductible works

Earthquake deductibles are percentages, not flat dollar amounts, and the percentage applies to the insured value of the property, not to the size of the loss. Under the ISO endorsement, the percentage is applied separately to each building, to the personal property in each building, and to personal property in the open. That is how most buyers meet it, though the base differs by carrier and form: some deductibles are measured against the total insured value of the whole schedule, and some against the policy's earthquake limit.

In its 2026 Property State of the Market report, as reported by Artemis in April 2026, wholesale broker CRC Group put typical earthquake deductibles at about 5% in California, about 3% in the Pacific Northwest and about 2% in the New Madrid zone, with lower options on favorable risks outside heavily aggregated areas. Those are market norms, not guarantees, and a pre-1980 concrete building on soft soil can be quoted higher.

A hypothetical example

Say a Seattle-area owner insures two buildings for $10 million and $6 million, with a 5% earthquake deductible on a per-building basis. A quake causes $800,000 of damage to the first and $200,000 to the second.

The owner collects $300,000 against $1 million of physical damage. Building B, which lost 3% of its value, produces nothing. Had the deductible been applied to the combined $16 million schedule ($800,000), the total payment would have been $200,000. Per-building application is never worse for the buyer than a blanket deductible, and it is a negotiating point worth raising. Several carriers also sell deductible buy-down coverage to fill part of the gap.

Business income and extra expense

Time-element coverage follows the cause of loss. business income and extra expense pay only when the physical damage is a covered cause, so a policy with no earthquake coverage pays nothing for the weeks a business is shut after a quake. When the earthquake endorsement is added, it has to be attached to the coverage form that carries the income coverage. Check the declarations to confirm that the income limit and the earthquake coverage are actually connected, and that the 72-hour waiting period common to income forms is not stretched in the earthquake terms. The business income (interruption) limit calculator helps set the limit you are asking the carrier to extend.

Utility and civil authority extensions are a separate question, and many earthquake forms limit them. Regional outages after a major quake can last longer than damage to your own building.

What underwriters want to see

Earthquake rating leans on the catastrophe model, which scores each location by distance to faults, soil type and liquefaction potential, and then by the building itself. The submission should carry accurate fields, because a blank field is typically modeled at the worst case. The statement of values guide covers the basics.

• Year built, number of stories and square footage.
• Construction type and structural system: wood frame, tilt-up, reinforced concrete, unreinforced masonry, steel.
• Seismic upgrades with dates: bolting to the foundation, soft-story retrofit, wall-to-roof anchorage.
• Soil and liquefaction conditions, if known from a geotechnical report.
• Occupancy and any cripple walls, tuck-under parking or other irregularities.
• Replacement-cost values by building, with contents and income values separated.

For larger or higher-risk buildings, the carrier or the lender may ask for a seismic risk assessment. The standard reference is ASTM E2026, which moved the industry from a single "PML" number toward a scenario expected loss (SEL) for a defined event, commonly the 475-year shaking level, with a scenario upper loss (SUL) at the 90% confidence point. Commercial mortgage lenders in seismic zones have long used a high damage ratio in those reports, with 20% a commonly cited trigger, to decide whether to require earthquake insurance or a retrofit. Treat a lender's requirement, which is contractual, as separate from what you decide to buy to protect the business; see probable maximum loss for the vocabulary.

Where the exposure is, and the market

Earthquake risk is not only a California issue. The USGS's 2023 National Seismic Hazard Model, released in January 2024, found that nearly 75% of the country could experience potentially damaging shaking over the next 100 years, and that 37 states have had a magnitude 5 or larger quake in the last 200 years (USGS). Seismic zones range from California and Washington to Alaska, Utah, the New Madrid zone in the central Mississippi valley and the South Carolina coast.

Take-up is thin among businesses. Wholesale broker Amwins noted in an October 2024 market piece that commercial buyers were underinsured for the peril and that a major quake in California or the Pacific Northwest could have outsized effects for that reason. It also described pricing as past its March 2024 peak, with potential rate reductions of 5% to 20% for improved risks and tougher terms for older concrete, masonry and tuck-under structures. Capacity moves; ask your broker for current appetite instead of relying on last year's quote. The california's commercial property and wildfire market guide covers the state context.

Gaps to check in your own policy

• Whether the earthquake limit is a sublimit, an annual aggregate, or the full building limit.
• Whether the deductible is per building, per location, or across the whole schedule.
• Whether code-upgrade costs are included. The ordinance or law exclusion generally still applies to an earthquake loss unless that coverage is added and extended to the peril; see ordinance or law coverage: paying for code upgrades after a loss.
• Land, landscaping, exterior masonry veneer and other items that earthquake forms restrict or exclude.
• Whether coverage for landslide, sinkhole and tsunami is excluded, and what covers them instead.

A licensed broker can run these against your actual forms. A policy that has not been read line by line is a common source of claim disputes in large events.

Key takeaways

• A standard commercial property policy excludes earthquake, other than fire or explosion that follows one.
• Coverage comes from an endorsement such as ISO CP 10 40 or from a stand-alone DIC or earthquake policy, usually placed in the surplus lines market in high-hazard zones.
• Deductibles are percentages of insured value, often 2% to 5% in the market CRC described for 2026, and per-building application costs the buyer less than a blanket deductible.
• Business income pays after an earthquake only if the earthquake coverage is attached to the income form.
• Accurate construction and retrofit data affect both price and whether capacity is offered at all.