Earthquake insurance is tough. Earthquakes are nearly impossible to predict, which is why most insurance policies have an exclusion for damage caused by earth movement. However, earthquakes are much more common on the West Coast than anywhere else in the country, due to the positioning of Earth's tectonic plates. In recent years, a new type of insurance has gained traction to provide coverage for catastrophic events like earthquakes – parametric insurance.

Parametric insurance offers immediate coverage to the insured based on a specific trigger. California-based carrier Jumpstart Insurance has begun offering parametric coverage for earthquakes in California, Oregon, and Washington. A copy of the California policy can be found here. The policies are underwritten by Lloyd's, and coverage can be provided to businesses and homeowners. The company provides a lump sum payment to the insured once a claim has been made that can cover a variety of related costs and expenses. We will break our analysis of the Jumpstart policy for California into the following sections:

Part I – Definitions