Earthquake Policies a Hot Topic with Homeowners

By Hunter Lane:

Disaster can strike at any time, but homeowners insurance can help make those situation a little more manageable. 

A home and the possessions in it are generally a person’s largest assets, so properly insuring them is important for every homeowner. According to the Insurance Information Institute, standard homeowners insurance covers the structure of the home and personal belongings. It also offers liability protection in case somebody got injured on the property and wanted to hold the owner accountable. Finally, it includes additional living expenses in case the owner is temporarily unable to live in the structure because of a tornado, fire or theft. 

Freddie Ferrell, agent with Insurance Professionals of Oklahoma, said that homeowners policies generally either have a replacement cost for the dwelling or an actual cash value. Ferrell said a plan that covers replacement cost may be more expensive, but that’s what he recommends, because if a disaster destroys the home, the owner will want to cover the cost of rebuilding. 

Damage caused by most disasters is covered by a typical policy, but there are exceptions. Disasters not included in standard homeowners insurance are floods and earthquakes, or damage caused by poor maintenance. Additional coverage may be purchased for floods and earthquakes, but maintenance-related problems are the homeowner’s responsibility. 

Depending on where an individual lives and the foundation of the house, additional coverage might be required – or at least, be a good idea. According to the U.S. Geological Survey, from 1978 to 2008, Oklahoma averaged just two 3.0 magnitude or larger earthquakes per year. However, from January to May 2 of 2014, there where 145 3.0 or larger magnitude earthquakes in Oklahoma. Analysis by the USGS attributes the dramatic rise in earthquake numbers to the injection of wastewater into deep geological formations.

“You do not need flood insurance unless you live in a flood plain,” Ferrell said. “Earthquake insurance is a bit of a hot topic. It’s one of those benefits that if it makes you feel good, I’d go ahead and get it, because you know you’re going to have the coverage.”

The problem with earthquake insurance in Oklahoma, he said, is that the deductibles are so high the policy holder really has to suffer a major loss before it will pay off. 

“The minimum deductible you can get is 2 percent, and it can be pretty high. You see most companies going to a 10 percent deductible, and that’s going to be 10 percent of the replacement cost value,” Ferrell said. “So if you’re looking at a $150,000 house, your deductible for earthquakes is going to be $15,000, but the coverage is available.”

Donald Brown, an agent with Farmers Insurance, said he has been getting more questions about earthquake insurance. He advises people to consult with their agents on the need for it. 

“If you have a brick-structured home, it’s definitely something you want to consider,” Brown said. “Typically the shifting of the earth causes cracks in your bricks. Also, if you have a slab foundation, it can cause a crack in your slab.”

Similar to homeowners insurance is renters insurance. Brown said renters insurance is available to people who rent property and would like to insure their personal belongings while occupying the dwelling. Liability plans are also available to renters in case somebody is injured on the property.

“[Renters insurance] is for if you’re in an apartment and want to cover your content in the event the complex burns down or your stuff is stolen, or a tornado wipes it out,” Brown said. “The cost of the plan depends on what you have, how much coverage you want and the area you’re in.”

Policies can also be taken out to insure specific items. Ferrell said these policies are similar to those for structures, in the sense that they cover the replacement cost or the actual cash value.

Items that are commonly insured separately are generally fairly expensive – like silverware, china, jewelry, guns or collectibles.

“You always want replacement cost, because you don’t want the insurance company telling you what your camera is worth,” Ferrell said. “But it’s an option for people.”

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