Do you have earthquake insurance? Our Insurance Commissioner John Doak said we should, but explained that earthquake coverage is different.
Doak said, "Earthquake coverage is an endorsement. An endorsement is a specialty clause to an existing clause that adds or deletes coverage. Once you add this coverage it is subject to a percentage deductible which is different than a flat deductible"
Doak says how the quake measures on the Richter Scale also matters.
"It's all subject to each insurance company. Specific language and those cutoffs may be at different levels."
Doak said previous impact may play a role as well.
"They may have to assess if there is any damage to your foundation or to your home after the many issues we've had in this state."
It's still protection that may be needed sooner or later.
According to Kesha Keith from the Oklahoma Insurance Department, since Oklahoman's record-setting 5.6 magnitude earthquake in November 2011, more people are investing in earthquake insurance.
One major insurer told the Oklahoma Insurance Department that 18 percent of their policyholders now have insurance, compared to 3 percent in 2011.
With the recent earthquakes that have struck Oklahoma, many Oklahomans are wondering if it is time they buy earthquake insurance.
1. Why should consumers buy earthquake insurance?
Earthquakes are not covered under a typical homeowners or renters policy and can cause significant damage to property. It’s important for consumers to consider how they would manage the costs of recovering from an earthquake should they be impacted. For example, can they afford to repair or rebuild and how likely is the home or business to be seriously damaged? Brick homes, wood-frame homes with crawl spaces and multi-story homes are the most likely to suffer serious damage from an earthquake. Consumers should also know that most companies won’t sell new earthquake insurance policies for 30-60 days after a quake due to the expectation of aftershocks.
2. How can consumers purchase earthquake coverage?
An earthquake endorsement can be added to home insurance policies, although not every insurance company offers earthquake coverage. Earthquake insurance is also available as a stand-alone policy independent of homeowners insurance.
3. What does earthquake insurance cover?
An earthquake insurance policy covers home repairs needed due to earthquake damage and personal property directly damaged by an earthquake. It might cover increased costs of repair to meet current building codes and costs to stabilize the land beneath structures. It pays extra living expenses while the home is under repair and covers the cost of debris removal.
An earthquake policy typically does not cover damage to lot or land, such as sinkholes. Earthquake insurance also does not protect vehicles and won’t cover the cost of external water damage. Some insurance companies do not cover the replacement of masonry veneer – brick, rock or stone that covers the outside of the home. Be prepared to clearly explain what will and will not be covered for your clients.
4. How much coverage should be bought and how much does it cost?
The price of adding earthquake insurance is a small percentage of the cost of the underlying homeowners policy.
Homeowners decide how much insurance they want to purchase for both the structure and contents. The right coverage value will depend on how much of the repair and replacement costs can be paid out-of-pocket should the consumer suffer a total loss. Earthquake policies vary in cost depending on multiple factors, including the desired level of coverage and deductible amount. They are also determined by the property’s location, age and construction.
Insuring a home for just its appraisal or loan value will likely mean that in the event of an earthquake, there will only be enough coverage to repay the mortgage lender and not enough to repair the home. Additionally, it is important to make consumers aware of insurance policy limits of coverage. Often within these limits are sub-limits on specific items, such as a $50,000 limit on personal property replacement with a $5,000 sub-limit on computers and peripherals.
Click here for more information and tips on earthquake insurance.