Underinsurance and issues with insurance companies are worse than ever in 2022.
The fire season has already begun, with over 3,000 fires burning over 21,000 acres by mid-June.
The 2020 and 2021 fire seasons were the worst on record, and 2022 looks to
meet or exceed those expectations.
In an attempt to protect homeowners, the California Department of Insurance has issued a number of new regulations that will apply to people who lose their homes in 2022.
- Insurance companies can no longer deduct the land value when paying an insurance claim if a wildfire survivor chooses to relocate rather than rebuild their home at the same location — which will lead to higher payouts for consumers. After recent major wildfires, some insurance companies refused to include the value of land when paying a total loss claim, reducing the total payout by tens to hundreds of thousands of dollars. This change gives homeowners more choices in whether to rebuild or relocate their new home.
- Residents under mandatory evacuation for wildfire, even if they suffer no damage to their home, will receive additional living expenses for at least two weeks, with extensions for good cause.
- Insurance companies cannot restrict additional living expenses if a home is rendered uninhabitable due to a wildfire or other covered peril, even if the damage is not to the property itself. This addresses the problems after recent major fires when insurance companies denied benefits even though damaged power and water lines made homes uninhabitable. An insurance company may provide a reasonable alternative remedy that addresses the property condition, such as a portable generator in the case of downed power lines or a portable water source.
- In cases of a total loss related to a state of emergency, insurance companies must provide an advance payment of no less than four months of additional living expenses if the consumer requests it, with additional benefits due after the advance period upon proper documentation.
- Wildfire survivors do not have to use a company-specific inventory form for lost contents and can include groupings of categories such as clothing, shoes, books, food items, and DVDs rather than having to list individual items.
- Insurance companies must offer a 60-day grace period on payment of policy premiums for properties located within the affected area defined in the declared state of emergency.
- Insurance companies must inform consumers in writing if the policyholder purchases a policy that does not cover the peril of fire or if the insurance company removes the peril of fire when the policy is renewed — which could leave the policyholder unprotected from a wildfire. Following recent fires, the Department of Insurance heard from consumers who thought they had coverage for fire, only to learn that their insurance did not cover this loss.
- Residential fire policies that provide dwelling structure coverage will be required to include a minimum of 10% of primary dwelling limits as an additional amount available to help consumers rebuild resiliently with upgraded building codes such as fire sprinklers and solar panels.
- Insurance companies cannot withhold extended replacement coverage if an insured wants to buy a new home instead of rebuilding.
While all of this will help protect Californians who lose their homes this year, the best protection you have is to increase your insurance limits now. Throughout California, it is costing $500-$1,000 per square foot to rebuild. Underinsurance gets worse each year as construction prices continue to rise and insurance estimates fail to keep pace.
Fully two-thirds of Americans nationwide are underinsured and will be unable to rebuild in the event of a disaster. In California, it was more than 80% in 2018 and only gets worse each year.
Email your insurance agent or insurance company. Ask to review your insurance. Is the correct quality grade and style assigned? Is the square footage correct? Have you made upgrades that are not included? Do you have enough code upgrade coverage and extended replacement cost? If you own acreage, does your policy insure it? If your insurer insists that you are amply covered, get that assurance in writing. You may need it.
Kantor & Kantor specializes in fire damage claims denied or disputed by an insurer. If you need help with your fire damage claim, call our law firm today for a free case evaluation today.
