Insurance

What You Should Know About Insurance and Wildfires

What You Should Know About Insurance and Wildfires

Wildfires have become a growing concern for many homes as dry conditions have extended across the country in recent years. According to a CoreLogic assessment from 2019, 775,654 residential homes in 13 western states were at risk of wildfire devastation. By 2020, the number of dwellings will have risen to 4.5 million. In addition, wildfires burned more than 17,700 homes in 2020, with California residences accounting for the largest amount of damages. It’s a wise decision to insure your home against the financial consequences of a wildfire.

What is Wildfire Insurance, and how does it work?

Wildfires are often covered by ordinary house insurance policies offered by state-approved insurers. However, everything is changing. Insurers in high-risk jurisdictions have raised premiums since 2017, owing to an increase in wildfire damage across the West.

Insurance coverage varies, but it should normally cover damage caused by smoke and fire to the following items:

  • The construction or structure of your home
  • Any outbuildings on the land, such as a garage, a shed, or an apartment
  • The landscaping, the pool, the patio space, and the belongings are all included.
  • Debris cleanup
  • Personal belongings or contents of the house
  • An upgrade to the building code may be required or optional.
  • Living expenditures not covered by insurance

In the event of a wildfire, how much will your insurance company pay?

Because each insurance is unique, you’ll want to double-check your coverage and restrictions. If you reside in a wildfire-prone location, make sure you’re not underinsured, which means you’ll get enough money to repair a home with the same features at current new-build rates if yours is destroyed.

Replacement Cost Value vs. Replacement Cost Guaranteed/Extended

Replacement Cost Value (vs. Actual Cash Value) coverage covers the actual cost of rebuilding your home, but only up to a certain maximum, and allows you to rebuild at current new-build rates.

Certain states also have plans that provide Guaranteed/Extended Replacement Cost coverage, which restores your home regardless of how much building supplies or labor costs rise after a disaster as many people rush to rebuild everything at once, albeit this coverage is often more expensive.

Furthermore, building regulations have changed significantly in some regions over the last 30 years, so anyone searching for policies in wildfire-prone areas should look for a coverage that includes updated building code coverage during a rebuild. This guarantees you have adequate funds to construct your new home according to current building codes.

It Gives Peace of Mind 

In addition to your insurance coverage, you may find Wildfire Response Endorsement or Wildfire Defense Services to be beneficial. In wildfire-prone locations, paying a retainer for this service, which acts as a private fire brigade ready to respond if a wildfire threatens your home, can make sense. The cost varies by insurer, although some, such as State Farm, have lately made this coverage available to all policyholders.

When a wildfire threatens your home, a class 6 fire engine team (along with wildland brush trucks) is dispatched to harden it, close windows and doors, clear defensible space, install sprinklers, and lay flame-resistant flannel.

Where Can You Get Insurance Against Wildfires?

Check with your homeowner’s insurance company to see if you can add wildfire insurance to your policy. If you can’t receive coverage because you live in a high-risk location, you might be able to find a FAIR plan, a state-mandated program that gives high-risk properties fair access to insurance.

Admitted insurers are non-renewing clients where they are allowed to in several locations near those that have lost a lot of houses to severe wildfires. However, after a disastrous wildfire, many states’ insurance commissioners put a one-year moratorium on non-renewals. If an insurer refuses to renew your policy, you can appeal the decision.

It is also important to note that one can contact your state’s insurance commission and request assistance. If your policy isn’t renewed, you’ll have to get coverage from a non-admitted insurer (one that hasn’t been approved by your state’s insurance authority), which will cost you around 3-6 times as much as house insurance from an admitted carrier. You can also purchase insurance through the insurer of last resort in your state, which combines high-risk individuals and is generally the most expensive choice.

In a wildfire insurance lawsuit, how are claims settled?

To collect compensation, the insured must normally file a claim form within 15 days after the date of the fire. Photos showing the damages must be provided by the claimant. Though clearing trash and cleaning up is beneficial, do not remove any proof of the fire or damage until the claim has been handled.

Is it possible for an insurer to deny a wildfire claim?

If the amount of damages claimed is exorbitant or overstated, or if the homeowner’s policy was in arrears at the time of the fire, insurance companies can deny a claim. Make sure your insurance payments are up to date!

What is the definition of a wildfire smoke claim?

You can file a smoke claim if your home was not burned by a wildfire but was damaged by ash, soot, or smoke from a wildfire within 10 miles. Smoke or soot can cause damage to your home’s interior, exterior, and possessions, and can result in a wildfire smoke claim.

Conclusion

Your homeowner policy should cover a wildfire in most non-wildfire-prone areas.

The Author

Dotun O

Dotun is a financial enthusiast who specializes in first-in-class financial content including crypto, blockchain, market, and business to educate and inform readers.