In one sentence
Specialized coverage for seismic risk, required by lenders in exposed markets, often informed by a seismic study.
The longer version
In seismically active areas, lenders may require earthquake coverage or a seismic risk study quantifying probable maximum loss. The requirement depends on the market and the building.
Where required, the seismic study and the coverage become specific diligence and closing items tied to the property's location.
Common questions
- When do lenders require earthquake insurance?
- When a seismic study shows the building's probable maximum loss above the lender's threshold, typically in high seismic zones.
- How does a seismic study affect earthquake insurance?
- The study estimates likely damage. If the probable maximum loss is high, the lender may require earthquake coverage or retrofit work.
- Is earthquake coverage part of a standard property policy?
- Usually not. It is typically a separate policy or endorsement with its own limits and often a large deductible.
Keep reading
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The commercial loan closing processThe five stages from term sheet to funded.
- Commercial loan softwareWhere this sits in the lending stack.