Because of California wildfires in recent years, insurance companies have issued substantial payouts to thousands of customers, which negatively affected their bottom line. In response, insurance companies are increasing premiums and denying coverage to the people who need it most. Here are some tips on how to maintain the insurance coverage we need in this new era of seasonal wildfires.
First, if you’re thinking you’re good because you have homeowner’s insurance, you may want to read your policy. It’s important to know exactly what’s covered. Many people who thought they had adequate insurance in 2017 learned otherwise when they lost their homes to wildfire and were left without enough money to rebuild.
Wildfires can damage properties in at least two ways: direct damage (burning your home) and indirect damage (from smoke taint or subsequent flooding). Almost no standard homeowner policies cover flooding, and some do not cover wildfire damage or the indirect consequences it can cause.
So, the most important thing you can do right now is to pay attention. As of January, insurance companies are legally required to give you at least 75 days advance notice before cancelling a policy and Governor Gavin Newsom just declared that insurance companies cannot cancel within a year of a declared state of emergency. So, if your insurance company drops you without adequate notice, contact the California Department of Insurance (DOI) at 1-800-927-HELP or online at www.insurance.ca.gov. Check to see if your policy has a guaranteed renewal provision. You may also be entitled to a renewal under laws applicable to homes that are lost in a declared disaster.
If you do get a notice of cancellation, get in touch with your insurance company to see if there are steps you can take to make your property less of a fire risk. You may be able to continue coverage if you add roof sprinklers or remove the tree that hangs over your roof.
SHOP EARLY AND SHOP LOCAL
If the insurance company doesn’t budge and refuses to renew your policy, get in touch with a local insurance broker to start shopping for replacement insurance as early as possible. Local brokers will go to bat for you, often extending the time before cancellation and sometimes convincing insurance companies to keep you on by explaining of the true level of risk (which may be lower than the insurance company realized). When choosing a local insurance broker, I recommend working with brokers who can provide insurance through multiple carriers. Get bids and make a note of which insurance company the bids came from, so you don’t double up if you get bids from multiple brokers.
GET ENOUGH COVERAGE
Even if your policy isn’t getting cancelled, you may want to check the level of coverage. I recommend having replacement coverage plus code upgrades. If your home was built 50 years ago, for example, you’ll want to do more than replace the house as it was. You’ll want to have enough insurance money to rebuild using current building standards—appropriate insulation, safer wiring, GFI outlets, electrical breakers, and more. Also, you may want to confirm you’ve got coverage for debris removal and temporary living expenses. Generally speaking, there’s not a big jump in premium to get an additional $50,000 or $100,000 in coverage.
Next week, I’ll share information about why flood insurance may be a worthwhile investment now that wildfires are a more common occurrence.
If you have questions about property management or real estate, please contact me at firstname.lastname@example.org or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.