The Los Angeles wildfires created a nightmare for homeowners burned out of their homes and wondering what can be salvaged. Some had their policies cancelled or not renewed before the fire and now face moving on with life not only dealing with the devastation but doing so without adequate – or any – insurance.
While the conditions that blew up that urban wildfire into an inferno (dry winter, high winds, lots of underbrush) might not be present where you live, it’s a wake-up call to check your levels of protection, starting with your insurance coverage. So, if you want to get ahead of any disaster our region might experience, you should take a close look at your homeowner’s insurance policy with these tips in mind.
Start with Replacement Cost Coverage
Does your policy cover replacement costs or just actual cash value? It’s a huge difference.
Replacement costs coverages protects what it would cost to rebuild or repair your home with materials of similar quality, even if prices have increased.
Actual cash value includes depreciation, which means you could wind up with less money or older materials or appliances as they have “used” value. Do you really want to shop for a used refrigerator while going through all this? If this is the language in your policy, you’ll likely want to switch to replacement cost coverage, which will cost more but offer greater peace of mind.
Adjust for Your Home’s Current Value
Arizona’s real estate market has been booming, with home values skyrocketing in many areas. If your policy reflects your property’s value in 1999, that could be a problem. Talk to your insurance agent about making sure the current value is insured.
Account for Inflation
Anyone who has lived through the past few years knows it’s more than real estate that’s gone up. The pandemic and other events (we’re not going to delve into politics or economics here) have boosted prices considerably across the board – including those materials and supplies needed to fix up your damaged family home. Think wood, wallboard, appliances, paint, raw materials – not to mention labor and construction expertise, when you can find that.
It’s going to be much more expensive to rebuild than it was when you first bought your homeowner’s insurance policy, so make sure your policy speaks to those inflated costs. Some policies have an inflation guard protection. Does yours?
What About Personal Belongings?
The bricks and sticks aren’t the only things lost in disasters. Everything inside must be as well, and that’s likely to include the things most near and dear to the heart. You not only should make sure personal belongings are covered at current values, make sure you can prove you actually own it.
So it’s a good idea to take an inventory of all your personal belongings, including appliances, furniture, electronics, décor, jewelry and anything else that’s valuable. The best way to do this is to walk around the house taking a video of every room, what’s on the walls and floors, explaining into the recording what they are and why they’re valuable. Store that in a site that wouldn’t be affected by the disaster, like in the cloud. Writing it all down and giving it to your agent would be worthwhile as well.
If you have a Picasso or the Hope Diamond in the back bedroom (or other valuable items not likely to be covered by a standard policy), talk to your agent about a rider specifically covering those things.
Consider Liability Coverage
Disasters tend to make people sue-happy, so you should also make sure your liability insurance is adequate. Liability coverage can offer legal and financial protection in case someone is injured onyour property or if you are at least partially responsible for damaging someone else’s property. If your fire spreads to the neighbor, you might get sued. If your liability isn’t sufficient, consider upping it, perhaps even to $500,000.
Other Added Coverages
While we might not get the California fires in your neighborhood, there could be other coverages worth exploring, like sewer backup damage. If your house is in or near a flood zone, even if mitigated, it might be worth considering that. You also might add an umbrella coverage for undefined damages or liability, which often isn’t enormously expensive but offers greater peace o mind.
Other Tips for Reviewing Your Homeowner Insurance Policy
Make sure you understand deductibles and cap coverages. A higher deductible generally means a less expensive policy as you share some of the costs but are not left decimated by the disaster.
Meet with your insurance agent once a year to go over your policy and make needed updates.
And once you have listed for yourself exactly what you want out of a homeowner’s insurance policy, it will be much easier to shop around for the best deal. Remember, though, that a low price is meaningless if the insurance company won’t pay or runs you through flaming hoops. If your insurance company has been solid so far, that’s no small consideration. Same goes for your agent.
Lastly, don’t put this off because it isn’t pressing today. Just ask the people in Pacific Palisades or Altadena.
Hal DeKeyser
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