Parametric earthquake insurance, offered by many insurance companies available for both residential and commercial properties in California, Oregon, and Washington. Parametric insurance provides a payout when a defined event occurs, rather than reimbursing the exact loss amount like traditional insurance. There’s no paperwork or adjusters needed for a payout. The customer receives the funds as a lump sum. The payout is the limit selected for the policy. This type of coverage is not a replacement for traditional earthquake insurance and does not meet California’s state requirement to offer indemnity earthquake insurance with homeowners’ policies. It should be seen as an additional option when discussing coverage, and can be offered at any time.
A payout occurs when the peak ground velocity reaches a defined threshold at the insured location:
- Washington and Oregon: 20 cm/s
- California: 30 cm/s
The measurement is provided by the United States Geological Survey (USGS), using third-party data for objectivity and transparency.
While magnitude is more commonly discussed, ground velocity is a clearer indicator of surface movement. A high-magnitude earthquake deep underground may cause little to no surface movement, which is why velocity is used.
Coverage is available up to $20,000 for residential properties and up to $50,000 for commercial properties, including entire condo buildings. The low average annual cost makes it an affordable way to cover expenses caused by a qualifying earthquake.
The payout process is straightforward:
- After a qualifying quake, the customer receives a text asking if they have any expenses as a result of the earthquake.
- If they respond “Yes,” the payout is initiated.
With no adjusters involved, payments can be made in days directly to the customer’s bank account with no documentation required. Funds can be used for temporary housing, damage repairs, or paying the deductible on a traditional earthquake policy.
When presenting earthquake insurance to customers, an expert might highlight:
- A lump sum payout of the selected coverage amount.
- No need for paperwork or receipts.
- Fast payout to support recovery needs.
- Lower cost compared to traditional policies.
- Useful as an add-on to cover high deductibles in indemnity earthquake insurance.
Parametric Earthquake Insurance for Businesses
Earthquakes occur relatively infrequently, but when they do, they can leave behind severe damage, destruction, and long-term economic disruption. For businesses, the financial impact often extends beyond physical damage. Costs such as deductibles, lost revenue, and contingent business interruption may not be covered by traditional insurance.
Parametric earthquake insurance can help address these gaps and provide fast financial support for recovery. It is a flexible and transparent product designed to get cash in hand for earthquake-related losses when it is needed most.
When an insured location is impacted by an earthquake, the payout is determined using the highest ground shaking recorded at that location. These policies can cover multiple locations and offer simplicity through:
- Minimal exclusions
- No sub-limits
- No deductibles
Funds can be received in 30 days or less, providing quick liquidity to address virtually any business need after an earthquake. For businesses exposed to earthquake risk, parametric coverage can play a key role in navigating uncertainty and accelerating recovery.
Also, Read: