Earthquake Damage and Selling a House in Oklahoma

There are cracks above the door frames and along the garage slab. Somebody in the family is sure it was the earthquakes, somebody else says the house has always moved. Whichever is right, one fact decides what happens next: your standard homeowners policy almost certainly does not cover earthquake damage, and never did.

This article covers what a homeowners policy actually excludes, what earthquake cover costs and why its deductible surprises people, what you must disclose, and how cracks of any origin behave in a sale.

Your policy excludes it, and always did

The Oklahoma Insurance Department puts it plainly: earthquakes are not covered under a typical homeowners or renters policy. This is not a loophole an insurer found afterwards. The standard policy form excludes earth movement as a named exclusion, which covers earthquakes along with landslides and sinkholes.

Cover exists, but it has to be bought separately, either as an endorsement added to the homeowners policy or as a stand-alone earthquake policy. Not every carrier offers it.

The Department also notes something worth knowing before you pick up the phone after a tremor: most companies will not sell new earthquake cover for thirty to sixty days after a quake, because of the expectation of aftershocks. Buying it the week after something happens is generally not available, and it would not cover the damage already done in any case.

The deductible is the part that shocks people

Earthquake deductibles do not work like the five hundred or thousand dollar figure on your homeowners policy.

The Oklahoma Insurance Department states that the deductible is calculated as a percentage of the insured value of the property, commonly five to ten per cent. On a house insured for a hundred thousand dollars, that is five to ten thousand dollars before the insurer pays anything.

Which means that for a great many Oklahoma earthquake claims, the damage never reaches the deductible, and the policy pays nothing.

The premium itself is comparatively modest. Oklahoma State University's extension material cites the Insurance Department's estimate of fifty to three hundred dollars a year for earthquake cover in Oklahoma, varying with size, location, age, construction and rebuild cost.

The Department makes one further point that matters more than it sounds: insuring a home only for its appraisal or loan value will likely mean there is enough to repay the lender and not enough to repair the house. Cover the rebuild cost, not the mortgage.

Which houses actually suffer

The Insurance Department identifies brick homes, wood-frame homes with crawl spaces and multi-storey homes as the most likely to suffer serious damage in an earthquake.

That is worth reading against Tulsa's housing stock, where brick is common and crawl spaces are everywhere. Our article on crawl space against slab construction covers the difference and our article on why Tulsa houses move covers the other causes, which matter here more than people expect.

Was it the earthquake, or was it the clay

This is where most families argue and it is worth settling with evidence rather than opinion, because the answer changes both the insurance position and the repair.

Oklahoma soils move. Expansive clay swells and shrinks with moisture, guttering that puts water against a foundation causes movement, and drought and heavy rain do more cumulative damage to Tulsa foundations than most seismic events do. Our articles on which foundation cracks matter and drainage, guttering and foundations go through the diagnosis.

An engineer's report is what settles it. It costs a few hundred dollars, it is the document a buyer's lender and a buyer's inspector both respect, and it converts an argument into a scope of work. Our article on what foundation repair costs in Tulsa has ranges, and get three written quotes for anything substantial.

If you did have cover and made a claim

A minority of Oklahoma homeowners do carry earthquake cover, and if you are one of them the position is different but not simple.

The first question is whether the loss reaches the deductible at all, and on a percentage deductible a great many do not. The second is causation, because an insurer will look at whether the damage came from the seismic event or from movement that was already under way. That is precisely why an engineer's report dated close to the event is worth more than one obtained a year later.

If a claim is underpaid rather than refused outright, the routes that cost you nothing come first. Ask the insurer in writing which policy language they relied on. Check whether your policy contains an appraisal clause, which our article on the insurance appraisal clause explains, because it is a defined way of resolving a disagreement about the amount of a loss without litigation. Our article on a denied claim in Oklahoma sets out what else to do, and the Oklahoma Insurance Department takes complaints about claim handling for free.

One trap worth naming. If a settlement has been paid and the repair has not been done, that has to be dealt with properly in the sale rather than quietly, particularly where a mortgage company is holding the funds in escrow and releasing them against completed work.

What you must tell a buyer

Known structural damage and known movement belong on the Oklahoma disclosure form whatever caused them, and so does a repair that was carried out. Our article on Oklahoma seller disclosure requirements covers how it works.

If repairs have been done, the paperwork is worth real money. An engineer's report, the scope of work, the invoice and any transferable warranty turn a red flag into a documented fixed problem. Our article on a transferable foundation warranty covers what transfers and what does not.

One point specific to insurance: a new earthquake policy will not cover damage that already existed. So a buyer cannot inherit your problem by buying a policy, which is another reason the repair and the paperwork matter more than the cover does.

Where we come in

If an engineer says the movement is minor or historic, repair it and sell normally. Cosmetic cracks filled properly, with a report saying the structure is sound, sell to ordinary financed buyers at ordinary prices. That nets you more than we will pay and we would rather tell you.

The cases where a cash sale fits are the ones where the arithmetic has genuinely changed. Structural work you cannot fund, with no insurance behind it because the peril was excluded or the damage never reached a percentage deductible. A house a lender will not approve until the work is done. Or a buyer who has already walked after an inspection, which our article on why appraisals come in low covers.

We buy with movement and cracked slabs in place. Our page on selling a house with foundation problems sets out how the number is built and what we look at.

The short version

• The Oklahoma Insurance Department states that earthquakes are not covered by a typical homeowners or renters policy. Earth movement is a named exclusion
• Cover has to be bought separately, and most companies will not write new policies for thirty to sixty days after a quake
• Deductibles are a percentage of insured value, commonly five to ten per cent, so five to ten thousand dollars on a house insured for a hundred thousand
• Premiums are modest, with the Department's estimate cited at fifty to three hundred dollars a year
• Insure the rebuild cost, not the loan balance, or there is enough to repay the lender and not enough to repair the house
• Brick homes, wood-frame homes with crawl spaces and multi-storey homes are the most exposed
• Get an engineer's report. It settles the cause, satisfies a buyer's lender and turns an argument into a scope of work
• Disclose known movement whatever caused it, and keep the repair paperwork