Earthquake Coverage

Standard property and master policies exclude earthquake, so shake coverage is bought separately, either as a standalone earthquake policy, a difference-in-conditions (DIC) policy, or an endorsement placed with a specialty market. Two features set it apart from the rest of the master program. First, the deductible is a percentage of the insured building value rather than a flat dollar amount, and it runs high, commonly in the 10 to 25 percent of insured value range, so on a multimillion-dollar building the retained loss before the policy pays anything is very large. Second, it is concentrated in California and the seismically active western states, where it is a real board decision rather than an afterthought. There is no single statute that requires an HOA to carry earthquake coverage; whether the association must buy it is generally driven by the governing documents or a board vote, not by law. In California, the California Earthquake Authority (CEA) is the state-established residential earthquake insurer, but the CEA writes individual residential policies and does not insure HOA common elements or master programs, so associations place shake coverage through the private specialty and DIC markets instead.

In earthquake country the first question is whether the governing documents require the coverage at all, because that determines whether not carrying it is a discretionary risk decision or a covenant breach. Read the declaration before treating earthquake as optional. If the association does carry it, the percentage deductible is the number that matters: translate the stated percentage into dollars against the current insured value, because that figure is what the community would have to fund out of reserves or a special assessment before the policy responds to a quake. A high percentage deductible on a large building can mean the coverage pays nothing on all but a catastrophic event, which is a legitimate board discussion about whether the premium buys meaningful protection. Where the community declines the coverage, document that it was a deliberate, disclosed board decision rather than a lapse, and tell owners so they can weigh earthquake coverage on their own HO-6 policies. This is a qualitative, best-practice area with no statutory floor, so the board's judgment and the governing documents carry the decision.

Earthquake on an HOA master program is almost always a separate placement, a standalone earthquake or difference-in-conditions policy through the specialty markets that write this class, not an item bundled into the base package. Capacity and pricing are tightest in California and the higher-hazard western zones, and the percentage deductible is where most of the negotiation actually happens, since a lower deductible often is not available at a workable premium. Treat the deductible structure, not just the limit, as the term to shop.