Is earthquake insurance worth it in Oklahoma?

Earthquake insurance in Oklahoma, is it worth it?

For most of us, our house is the biggest investment we’ll ever make as well as our most valuable asset. Most of us would agree that having insurance for our house is very important. But “insurance” can be a very general term and home insurance has very specific things it insures a house for.

Give me some stats!

 According to a survey by the Insurance Research Council, 66% of home insurance claims in Oklahoma are the result of weather events like hail, strong winds, and the occasional tornado. Hail damage is by far the most common cause of loss. Water pipe breaks, fires, and thefts cause the majority of the remaining claims homeowners make.

What about earthquake damage? Where is it on the statistical chart of losses? Although earthquakes are certainly numerous in Oklahoma (2,358 quakes of 3.0 or greater magnitude between 2010 and 2016 according to earthquakes.ok.gov), these numbers hardly compare to the storm-related claims filed by homeowners. According to the Tulsa World, since 2010 about 1800 earthquake claims have been filed. Compare that to over 98,000 hail-related claims just between 2013 and 2015. This doesn’t include all of the other types of claims for fire, water pipe breaks, and theft.

Those statistics would suggest that earthquake damage is far less likely than weather damage. However, if you have ever been shaken awake by an earthquake at 4:00 in the morning you will understand the emotional trigger to buy earthquake insurance. Looking coldly at the numbers, you can understand the logical decision to pass on earthquake insurance.

Give me some perspective!

Whether you buy earthquake insurance in Oklahoma or not, you need to buy it with your eyes wide open. Earthquake insurance is very specific coverage. This means that the damage to the home must be attributable to an earthquake event. The damage will then have to exceed the deductible of course before the insurance will pay. The deductible on most earthquake policies is quite high, usually 2%-25% of the insuring amount of the house. A large portion of the cost of an earthquake loss will be borne by the homeowner whether there is an insurance policy involved or not.

I’ve made a pretty strong argument for not buying earthquake insurance so far. But I am not trying to persuade you either way. My goal is to provide information and perspective on the nature of the risk of earthquake damage.

The argument for buying earthquake insurance may be obvious. The only policy you can purchase that will provide coverage for damage to your home from an earthquake is an earthquake policy. There is no arguing that the frequency of earthquakes has increased dramatically in the last 7 years. An article in The Atlantic predicted Oklahoma has a 40% chance of a major earthquake of 5.0 magnitude or larger. It goes on to predict that earthquake activity should diminish back to “normal” within the next 10 years.

Understanding that earthquake insurance in Oklahoma is best suited to cover catastrophic damage from an earthquake is paramount. The peace of mind that you would have coverage in an event like that is reason enough to purchase earthquake insurance. The risk of earthquake damage is a very real one. But like any other risk you buy insurance for, you must weigh the cost against the benefits.

The information contained in this page is provided for general informational purposes only. This information is not meant as professional or expert advice, and any reliance you place on such information is, therefore, strictly at your own risk.

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