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Tuesday, November 22, 2011
Oklahoma City – Oklahoma Insurance Commissioner John D. Doak announced that an Oklahoma general insurance agency is adding earthquake deductible buy-down insurance as a means of making the cost of recovering from earthquake damage more manageable for property owners.
Midlands Management Corporation of Oklahoma City, which already offered standalone earthquake coverage for commercial risks, will immediately begin quoting the new coverage immediately for interested consumers.
“I have spoken extensively with Oklahomans affected by the recent, record earthquake, and one of the common complaints expressed by property owners were the high deductibles sometimes associated with earthquake coverage,” Commissioner Doak said this morning as he prepared to visit more Lincoln County homeowners affected by the event. “While the annual premiums for earthquake insurance can be very affordable, some consumers who considered coverage in the past said they decided against it because of the deductibles.”
Earthquake insurance deductibles are typically calculated as a percentage of the insured property’s value. Some companies set that deductible as low as 2 percent of the property’s value, but other companies are quoting deductibles of 10 percent or even higher.
Doak notes that despite a high deductible, earthquake insurance could still be a wise financial choice. The owner of an insured home worth $100,000 would be out-of-pocket $10,000 for the deductible if the home was considered a total loss after an earthquake, but without any coverage the entire $100,000 loss would be borne by the homeowner.
The new coverage being quoted by Midlands Management is supplemental insurance for property owners who already have earthquake coverage through any company, and could mitigate a policyholder’s out-of-pocket cost for the deductible at a time of loss. Customers who purchase coverage through Midlands can opt to reduce their deductible to as little as 1 percent. Any licensed agent in Oklahoma can contact Midlands Management Corporation to write the coverage.
Charles C. Caldwell is President and CEO of Midlands Management, a company with a 21-year history in Oklahoma. Caldwell said the coverage offered by Midlands will be written through A-rated carriers and probably will appeal most to those with commercial properties or more expensive homes. The minimum premium begins at $250, which can be higher than the cost of annual earthquake coverage itself on many moderately priced homes.
“For those who choose this coverage, the financial impact of their personal deductible would not be as substantial,” Caldwell said. “A policyholder whose property is valued at $1 million might be responsible for a deductible of $100,000 or more without this coverage. With this coverage, for a modest annual premium that out-of-pocket cost could be reduced to $10,000.”
Doak said that while earthquake deductible buy-down insurance might not be suitable for all consumers, its availability fulfills one of his major goals for improving the state’s insurance market by giving options to Oklahoma consumers.
“Just like finding the right winter coat, no insurance policy is one-size-fits-all,” Doak said. “But this type of supplemental insurance might be the right fit for certain property owners who chose not to buy any earthquake coverage in the past because high deductibles left them feeling not fully covered.”
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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.
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