If you live anywhere in the Oklahoma City metro area, I’m sure you’ve seen the news from the past weekend. With all the images and overhead aerial shots it was hard to miss the story about the house near 122nd and Rockwell being destroyed after it suddenly exploded. The rumor is that the gas company was doing some work earlier that afternoon and it was gas a leak that caused the explosion leaving no trace of the home, but the official cause has yet to be reported. Let’s play devil’s advocate just for a moment though. What would happen if somehow the homeowner was responsible? While incidents like these are thankfully few and far between, it’s always interesting to see if the average Joe would be covered correctly when it comes to their insurance.
If the homeowner was found responsible, as in every claim situation the insurance would either cover it or it wouldn’t. Homeowners insurance would not cover wear and tear. Since materials eventually fall into decay unless updated, the insurance companies expect that a homeowner will keep their home from falling into disarray. That being said, let’s pretend that the insurance company approves and says that it’s covered. How would it start paying out? First things first—the home is absolutely destroyed, so it has to be replaced. When looking at people's insurance, one of the most common things I hear is “My house is only worth this much if I sold it.” The biggest mistake you could do is have your home insured for the market value of your home. Unless your home is brand new, the cost of materials has increased, city ordinances could have changed and the rebuilding must meet those standards, and we all know HOA’s are always adding on something else to make the neighborhood a better place. Your insurance should be figured off of replacement cost. The increased cost of meeting city ordinances is not usually included on a normal policy, it has to be added on. The same goes with fees from HOA’s. Besides rebuilding the house itself, it was also reported that as many as 50 houses in the surrounding area suffered damage. Who pays for that? A standard homeowner’s policy usually includes a certain amount of liability coverage. We usually think of this when the neighbor kids falls down the stairs and breaks his arm, but it’s the same principal. The liability would pay for the property damage to the additional houses, but usual limits are ranging from $100,000 to around $500,000. With 50 homes damaged, it is very likely that the damage could exceed that amount. If the homeowner had an umbrella in place, that policy would kick in. But if the homeowner did not have one he would be held responsible to pay what was left.
For the normal person, you’ll never have to worry about something so traumatic as your home exploding, but it’s still nice to know that you’re covered properly for the just in case moments in life. A knowledgeable agent can advise you for those kind of moments. If you have questions regarding your insurance, ECI is always here.