How to Manage Your Homeowners Insurance in a Wildfire Area
The first two months of 2022 were the driest in California’s history. Another very active fire season is expected, and the fire “season” is lengthening each year. The areas that burn are increasing, and parts of the state that do not typically see fires are becoming at risk.
As a homeowner, what can you do to protect yourself?
No one expects disaster to strike. But in these days of increasing wildfire danger, we can know enough to be prepared. Contact your insurance company before the fire, to protect yourself from needing to bring a suit after the fire.
Your insurer will have excellent suggestions for how to minimize the risk of fire on your property – cutting back growth, etc. But it will not be helpful in telling you how to ensure that you have enough coverage for your home in the event you need to rebuild. Their websites often state that you should consult your insurance agent. However, when you follow that directive and your insurance agent sets your limits and they are insufficient, your insurer blames you as the homeowner for not asking for more.
What can do you do to ensure that you have sufficient coverage?
- Talk to contractors in your area or people who are rebuilding. Costs for construction have escalated dramatically in the past few years. Your insurer may have your coverage set at the equivalent of $200 per square foot. But most parts of California are costing $500 or more per square foot for even a basic rebuild. Find out what it is costing in your area and ask to increase your coverage to that amount.
- Ask your insurance agent if you have enough coverage, and document that interaction in writing. If you ask your agent if the amount is sufficient, and he or she investigates it and confirms, then you have a much stronger position in the event you find yourself underinsured later. Do this annually if possible.
- Your insurer likely offers extended dwelling coverage. This increases the amount of your insurance coverage if your rebuild costs more than your limits. Most offer 25% or 50% on top of your base coverage. Ensure that you have this option and ensure that you have the highest percentage they offer.
- Code or ordinance. This is the coverage for work required because of building codes. Most insurance policies automatically include this coverage, which is calculated as 10% of your dwelling coverage. But especially if you have an older home, code upgrades can easily be 30-50% of the cost of your rebuild. As your insurer to increase your code ordinance coverage and if they ask you how high you want to go – ask them how high you can go and take that.
- Landscape. In fire-prone areas, people can live on several acres, often in hilly or forested areas. But the coverage is aimed at restoring a small backyard. It generally does not cover fencing and will not be enough to replace acres of trees. It does not cover the need for adding retaining walls or erosion protection after a fire, which can be required by the county. (This could fall under code ordinance coverage, but you will have used it all for your home already.) Ask about endorsements available for farmland, acreage, and fencing.
Make sure your coverage limits have been reviewed and updated within the last two years, and if you believe your limits are inadequate to replace your dwelling and personal property, and your insurance company tells you they will not increase your coverage amount because they believe that you can rebuild with the amount you have – document that in writing. There may come a time when you need it.