Earthquake Insurance: Deductible Buydown vs Parametric Coverage

February 11, 2026

British Columbia’s seismic risk makes earthquake coverage essential, but not all policies work the same way. This guide compares parametric vs deductible buydown earthquake insurance in BC, helping insurance brokers match clients with the right coverage based on risk tolerance, liquidity needs, and financial exposure.

Traditional earthquake insurance typically carries high deductibles, often 10% to 20% of the dwelling value. For a $1 million home, that means $100,000 to $200,000 out of pocket before coverage kicks in. Two solutions address this gap in different ways: deductible buydown and parametric coverage.

Earthquake Deductible Buydown: Traditional Coverage, Lower Out-of-Pocket

Deductible buydown works within the framework of traditional earthquake insurance. It reduces the initial deductible your client must pay before their standard earthquake coverage responds.

How Deductible Buydown Works

Think of deductible buydown as a separate policy that pays down the high deductible on the underlying earthquake coverage. If your client’s primary earthquake policy has a 15% deductible ($150,000 on a $1 million home), a buydown policy might reduce that to 5% ($50,000). The buydown policy covers the difference.

Key Features:

• Lowers the effective deductible on existing earthquake coverage
• Claims still require proof of loss and adjuster inspection
• Payment occurs after damage assessment
• Works with standard claims processes
• Available for both personal and commercial properties

Best For

Deductible buydown suits clients who want traditional indemnity-based coverage but need a more manageable out-of-pocket expense. It’s particularly valuable for homeowners who can’t absorb a six-figure deductible but want comprehensive protection for actual damage costs.

Parametric Earthquake Coverage: Fast Payment, Fixed Amount

Parametric coverage operates on a fundamentally different model. Instead of reimbursing actual damage, it pays a predetermined amount when specific seismic thresholds are met at your client’s location.

How Parametric Coverage Works

Parametric policies trigger based on ground motion intensity at the insured property’s location. If a quake meets the policy’s defined parameters (measured in peak ground acceleration or PGA), the policy pays the full benefit amount, regardless of actual damage to the property.

Key Features:

• Payment triggers automatically based on seismic data
• No adjuster inspection required
• Fast payment, typically within days or weeks
• Fixed benefit amount determined at policy inception
• Funds can be used for any purpose (immediate needs, temporary housing, deductibles)

Best For

Parametric coverage works well for clients who need immediate liquidity after a major earthquake. It’s valuable for covering immediate expenses like temporary accommodation, emergency repairs, or paying the deductible on traditional coverage. However, the fixed payment may not align with actual repair costs.

 

Side-by-Side Comparison

Feature	Deductible Buydown	Parametric Coverage
Payment Trigger	Actual damage to property	Seismic event parameters met
Claims Process	Traditional adjuster assessment	Automated based on seismic data
Payment Speed	After damage assessment (weeks/months)	Days to weeks after qualifying event
Payment Amount	Based on actual repair costs	Fixed predetermined amount
Proof of Loss Required	Yes	No
Fund Usage Restrictions	Property repairs	Any purpose
Works With Traditional Coverage	Designed to complement	Independent coverage

 

Which Option Makes Sense for Your Client?

The answer depends on their priorities, financial situation, and risk tolerance.

Consider Deductible Buydown When

• Client has traditional earthquake coverage but can’t afford the high deductible
• Full replacement cost coverage is the priority
• Client is comfortable with standard claims processes
• Property value and replacement cost are well-established

Consider Parametric Coverage When

• Immediate liquidity after a quake is critical
• Client needs funds for temporary relocation or emergency expenses
• Simple, fast claims process is valued
• Coverage is needed to pay deductibles on other policies

Consider Both When

• Client wants comprehensive protection across all scenarios
• Budget allows for layered coverage approach
• Property is high-value with significant financial exposure

Many sophisticated risk management strategies combine both solutions. Parametric coverage provides immediate funds for emergency needs, while deductible buydown ensures manageable out-of-pocket costs on traditional coverage for full property repairs.

BC’s Unique Seismic Risk Profile

British Columbia sits on the Cascadia Subduction Zone, one of North America’s most significant seismic threats. The “Big One” —a megathrust earthquake of magnitude 9.0 or greater — is not a matter of if, but when. This reality makes earthquake coverage not just prudent, but essential for BC property owners.

The challenge is that standard earthquake deductibles are structured for insurers’ protection against catastrophic loss, not for homeowners’ post-quake financial recovery. This creates the gap that both buydown and parametric solutions address.

Submission and Quoting

SPG Canada offers both earthquake deductible buydown and parametric coverage through the SPGC Portal. The portal allows you to quote, bind, and issue policies for both coverage types, with real-time underwriting for most risks.

What You Need for a Quote:

• Property address (critical for seismic zone determination)
• Building replacement value
• Current earthquake coverage details (for buydown)
• Desired coverage limits or benefit amounts
• Construction type and year built

Our underwriting team can help structure the right combination of coverages for complex risks or high-value properties.

The Bottom Line for Brokers

Understanding these two approaches to earthquake coverage gives you tools to address different client needs. Deductible buydown makes traditional earthquake insurance more accessible. Parametric coverage provides immediate liquidity when clients need it most.

The right choice depends on your client’s financial situation, risk tolerance, and priorities. In many cases, a combination of both provides the most comprehensive protection.

Questions about earthquake coverage options? Contact your SPG Canada underwriter or visit the SPGC Portal to get started.

Learn More:

Join our upcoming webinar “The Portal Series – EQ Solutions” on February 24, 2026, for hands-on training on quoting both coverage types through the SPGC Portal. Register at spgcanada.ca/broker-education

Contact:

Email: businessdevelopment@spgcanada.ca

Phone: 1.877.685.6533

Portal: portal.spgcanada.ca