A community association would purchase optional earthquake coverage because it is specifically excluded from all master policies. Why should you consider an earthquake policy? Ask yourself these questions and note your answers in the framework of fiduciary responsibility.
- If your complex was partially or completely destroyed by an earthquake would unit owners be willing to walk away from his/her investment? The resulting loss would not be reimbursed by insurance without an optional earthquake policy.
- Most CC&Rs do not require earthquake coverage. Being this is the case isn’t the board relieved from its responsibility to consider this coverage? (A board would not necessarily be relieved because of CC&R language. Further, director/officer coverage excludes liability coverage for board members who fail to maintain coverage for the peril of earthquake.)
- I heard that only 15% of homeowners in California have earthquake coverage. Isn’t this telling me that homeowners as a group think the risk of property damage due to an earthquake is very low? (It is true that only 15% of California homeowners have earthquake coverage. However, over 60% of California community associations carry the coverage.)
- Isn’t earthquake insurance just impossibly expensive? Most insurance companies are quite accurate when it comes to pricing to risk. A high premium for earthquake coverage means a higher likelihood of damage from an earthquake. While it can be painful to pay a high premium for this coverage, you must consider the elevated probability of a destructive earthquake in your specific area compared to others. Just like there are higher heating costs associated with living in a cold climate, a higher insurance premium may be the cost of living in many parts of beautiful California that happen to be at risk for earthquake damage.