Thursday, November 10, 2011
Oklahoma City– Oklahoma insurance consumers have been shaken to attention by recent damaging earthquakes and many have inquired about being insured against future tremors.
In most cases, uncovered customers have been temporarily turned away due to waiting periods on writing new coverage – known in the industry as “moratoriums” – put in place by the companies that offer earthquake insurance.
“Moratoriums vary depending on the company in question, but are an action taken by insurers to control their risk and offer reasonable coverage at more affordable prices,” said Oklahoma Insurance Commissioner John D. Doak. “We’re finding that in some cases consumers can get coverage right away or very soon, but they might pay a premium price to get it. Those who are willing to wait a few days or a full month are often able to get a much more attractive price on the coverage.”
Establishing a moratorium on selling new coverage is a typical response by an insurance company in the wake of larger earthquakes – and the Nov. 5 tremors in central Oklahoma certainly qualify at an all-time state-record magnitude of 5.6.
Such a quake frequently is followed by numerous and potentially damaging aftershocks.
“The time to buy any kind of insurance is in advance of the need,” Doak said. “Insurance is intended to protect the policyholder from the unexpected, and after a major earthquake, additional damaging events in the near term are not unexpected.”
Anecdotal evidence and information from a few major carriers gathered this week by the Insurance Department suggests that consumers in the state are paying anywhere from $100 to $500 per year for new earthquake coverage, depending on the company, what the policy covers (which can also vary) and the value of the home. Deductibles are ranging from 2 percent up to 10 percent of the home’s estimated value or perhaps higher. A small number of companies have no waiting period in place and some a very brief moratorium – one of the state’s biggest insurers requires existing customers to wait only 72 hours after the last 5.0 shock before adding an earthquake endorsement. In other cases, companies have moratoriums of 30 days or more before writing new earthquake coverage in the affected area.
Because each company’s practices vary considerably, the best advice the Oklahoma Insurance Department can give to homeowners is to shop around for the best coverage at the best price and a waiting period with which the consumer can be comfortable.
“The first place to look for earthquake coverage is with your current homeowners insurance company,” Doak said. “Often earthquake coverage can be added by a company for existing customers with good terms and at a reasonable price.
“If your existing company doesn’t offer earthquake coverage and doesn’t have access to another company in the market that does offer earthquake policies, this is your opportunity as a consumer to become educated and shop for the best policy you can find.”
Doak said the Oklahoma Insurance Department’s Consumer Assistance Team will answer questions and provide assistance to consumers who want to better understand earthquake insurance. He said consumers can visit the Insurance Department online at oid.ok.gov or call Consumer Assistance toll-free at (800) 522-0071 for help.
Earthquake insurance fast facts:
Earthquake coverage typically must be purchased apart from a standard homeowners policy, either as an “endorsement” added to the policy by the company that carries the purchaser’s homeowners insurance, or as a separate policy from a company specializing in earthquake coverage. Consumers will also have to wait a period of time – up to 30 days or more – after the most recently reported earthquakes in their area before they can purchase new earthquake insurance, due to the likelihood of aftershocks.
The cost of an earthquake policy varies depending on factors including the carrier and the policyholder’s desired level of coverage, but typically an Oklahoma homeowner might expect to pay between $100 and $150 per year for earthquake insurance.
Earthquake policies frequently have nuances, such as providing or not providing coverage for brick or stone veneers on the home. Sometimes such coverage is not standard in a company’s earthquake policy but can be added by the customer at a cost.
Earthquake insurance carries a separate and often substantial deductible, apart from the standard homeowners deductible. Often this deductible is calculated as a percentage of the insured property’s value – commonly 5 to 10 percent, but occasionally lower or higher – meaning that a $100,000 home would require a deductible of $5,000 to $10,000.
About the Oklahoma Insurance Department
The Oklahoma Insurance Department, an agency of the State of Oklahoma, is responsible for the education and protection of the insurance-buying public and for oversight of the insurance industry in the state.
