Earthquake Insurance Definitions

In the world of insurance, definitions mean a lot. Earthquake insurance definitions are no different. In many cases some of these definitions may be the same as the science definition, but in other cases it may not be. With all forms of insurance it is useful to read your own policy to check if your set of definitions are the same or different.

We present Earthquake Insurance Definitions so that consumers can review some terms used in the property insurance world pertaining to earthquakes.

Please note: The definition from your policy probably is different than these definitions, so please read your own insurance policy. When we say earthquake insurance we are referring to specialty property policies specific for the coverage for earthquakes. These are generally Not definitions from home insurance policies, which may have differining definitions.

Definitions on Earthquake Insurance Policies:

Earthquake Insurance policies are property insurance policies and may also provide some “Loss of Use” or “Loss of Rents” coverage. Some listerd terms on insurance policies are defined within the policy and other terms are not. Typically if a term is defined within the policy – the term is fonted in bold. In other words if the word is defined later in the policy language it will be in bold type face.

Other, important terms, may not be defined.

Not all policies are same. Even the definitions across different policies might be different. This is not a complete list of defitions from any one insurer.

What is A Companion Policy?

A difficult but important concept to understand as it realtes to the CEA.

Companion Policy: “means the fire insurance policy, homeowners policy, or other insurance policy that provides fire coverage for the property that is the subject of this CEA policy, and that is issued by the same participating insurer that services this CEA policy.”

Source: CEA BEQ-3B (01-2019 edition)

Companion policies and Participating Insurers are difficult concepts for consumers to understand within the CEA insurance program. Needless to say the CEA sells companion policies through participating insurers

What is a Dwelling as it related to Quake Insurance?

It is imperative that the owner of the policy understand what a dwelling is.

Dwelling: “means the residential structure or mobile home at the location described in the DECLARATIONS. Dwelling does not include land, whether or not beneath the residential structure or mobile home, even if required for support. Dwelling does not include any structure other than the residential structure or mobile home unless the structure (1) shares a common wall or a continuous roof line with the residential structure or mobile home or (2) is attached to the residential structure or mobile home by a foundation that is continuous with or contiguous to the foundation of the residential structure.”

Source: CEA BEQ-3B (01-2019 edition)

There are nuances to each property policy and what constitutes other structures vs the dwelling.

What is the Earthquake Insurance Definition of an Earthquake?

Easily understood when seen, less easy to define, what is an earthquake, exactly?

Earthquake: “means a vibration-generating rupture event caused by displacement within the earth’s crust through release of strain associated with tectonic processes and includes effects such as ground shaking, liquefaction, and damaging amplification of ground motion. While land sliding, including seismically-induced land sliding, is not itself an earthquake, we cover, subject to “LOSSES EXCLUDED” Item 5 and subject to all other terms and conditions of this policy, loss to covered property arising out of a seismically-induced landslide if that landslide is induced by, and would not have occurred in the absence of, an earthquake that commences during the policy period as part of a seismic event that commences during the policy period. Earthquake does not mean or include tsunami or volcanic eruption “

Source: CEA BEQ-3B (01-2019 edition)

The exact definition of the earthquake policy form you have is important. Read it, understand it.

How is Loss Assessment Defined on a CEA Policy?

A potentially super useful coverage.

Loss Assessment:  “means an assessment charged by an association of owners against all property owners in a common interest development that is properly and legally made as a result of a loss to structures or other real property contained within that common interest development, and those structures or other real property are owned by one or any combination of the following three categories: (i) all members of the association of owners collectively, (ii) the association of owners, or (iii) you.”

Source: CEA BEQ-3B (01-2019 edition)

A bit more on Loss Assessment. If you do not understand Loss Assessment, speak with your agent. In many situations loss assessment is an exceptionally important coverage.

What is a CEA Participating Insurer Definition?

A fairly complicated process not well explained by the CEA definition.

Participating Insurer: “means the insurance company that issued the companion policy, meets the legal requirements to offer residential earthquake coverage by participating in the CEA, and provides claims and policyholder services for this policy on behalf of the CEA.”

Source: CEA BEQ-3B (01-2019 edition)

This site did a very deep dive in the California Earthquake Authority Participating Insurer program. Consider reading about it when you get a chance. To reiterate, the CEA sells companion policies through participating insurers

What is the Definition of a Seismic Event as it Relates to Insurance?

A central concept to understand when considering this type of coverage.

Seismic Event: “means one or more earthquakes that occur within a 360-hour period. The seismic event commences upon the initial earthquake, and all earthquakes or aftershocks that occur within the 360 hours immediately following the initial earthquake are considered for purposes of this policy to be part of the same seismic event.”

Source: CEA BEQ-3B (01-2019 edition)

A seismic event is a geological term but its definition on the CEA earthquake policy form is important as it brings a lot of information concerning aftershocks.

What is the Sublimit Definition on a CEA Policy?

An important concept to understand on any property policy.

Sublimit: “means a dollar limit on a coverage for a specific type of property within a category of property that is subject to a higher total limit of insurance. Payment under a sublimit will reduce the amount available under the total limit of insurance. For example, a chimney is covered under “COVERAGE A: DWELLING” which has a limit of insurance shown on the DECLARATIONS page, but no more than the $10,000 sublimit will be paid for loss to any and all chimney(s). In that example, the overall amount available under the “COVERAGE A: DWELLING” and COVERAGE B: EXTENSIONS TO DWELLING combined single limit of insurance would be reduced by the amount that is paid for loss to any chimney. “

Source: CEA BEQ-3B (01-2019 edition)

Sublimits are common on property policies and it is usefull for consumers to get a handle on the limited coverage that sublimits bring to the table.

What is the Definition of Tectonic Process?

A geological definition that is germane to any quake policy.

Tectonic Process: “means natural adjustments of the earth’s crust that are wholly in response to regional stress conditions caused by natural dynamic forces within the earth’s interior, and not initiated, in whole or in any part, by any human activity.”

Source: CEA BEQ-3B (01-2019 edition)

The Tectonic process is another one of the earth science definitions that might be different with a given science book. However for the purposes of CEA policies – here it is.

How Do I Know if My Earthquake Policy has the Same Definitions?

The simplest way to find out what the definition is on your earthquake insurance policy is to read your insurance policy. Not the Declarations page, not the bill, but the Entire policy.

Please do not make any decisions on earthquake insurance without first speaking with a licensed advisor in your jurisdicition.