Homeowners in tremor-prone states, such as California, understand the need for earthquake insurance as a supplement for their standard homeowners insurance policies. However, residents in other states are quickly realizing that protection from earthquake damage does not come with their regular coverage. Oklahoma residents are reportedly seeking out earthquake insurance after a series of tremors rocked the state, especially in regions where a new technology used in oil exploration has been flourishing.
Earthquake Insurance and Fracking
Hydraulic fracturing, better known as “fracking”, involves the injection of water, sand, and chemicals into underground shale deposits. These injections break up the shale that surround oil and natural gas deposits. When these wells extract the oil or natural gas, they then inject their wastewater into the wells. These wastewater wells have been linked to an increased rate of earthquakes in regions that previously had little to no need for earthquake insurance.
Increased Need for Earthquake Insurance
Previous to the fracking boom, most Oklahoma residents never considered earthquake insurance. A study by the U.S. Geological Survey showed that the state averaged two earthquakes measuring at least 3.0 on the Richter scale each year from 1978 to 2008. Since the increase in fracking activity, the demand for earthquake insurance in Oklahoma has reached unprecedented levels. A study by the U.S. Geological Survey showed that more than 140 earthquakes measuring at least 3.0 on the Richter scale occurred in the first five months of 2014 alone.
High Deductibles and Earthquake Insurance
A major barrier for those seeking earthquake insurance is the high deductibles. The deductible is the portion of the claim that the policy holder must pay out-of-pocket before the insurer will cover any costs. Oklahoma residents can find earthquake insurance policies with deductibles up to ten percent of the home’s replacement value. For instance, a policy holder with a $200,000 home will have to pay $20,000 out of pocket before seeing any money from an earthquake insurance claim.
Replacement Costs Dictate Earthquake Insurance Premiums
Homeowners who are considering purchasing earthquake insurance policies should also understand the different between replacement costs and cash value. Most victims who file an earthquake insurance claim will seek to recover the replacement value of the home. A check for the replacement value would give the policy holder the funds to rebuild. These policies are more expensive than those that offer the cash value of the home. The cash value, which includes depreciation, may not cover the costs of rebuilding needed after an earthquake.
Source: Emergency Management
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NOTE: This blog post is a news story and does not imply an endorsement of Arguello Law Firm by any of the parties mentioned herein.