What you need to know about fire in­sur­ance

Los Angeles Times - - BUSINESS - DAVID LAZARUS

Most home­own­ers in­sur­ance poli­cies cover fire dam­age. But heads-up: That’s not the whole story.

If you live in a high-risk area, such as near a canyon, you may need to pay more for ad­di­tional cov­er­age.

And if, God for­bid, a fire has dev­as­tated whole com­mu­ni­ties, such as what we’re see­ing now in North­ern Cal­i­for­nia, your home­re­place­ment dol­lars could be stretched thin as costs soar for ev­ery­thing from ma­te­ri­als to la­bor.

“All those com­mer­cials about in­sur­ance com­pa­nies of­fer­ing peace of mind when things like this hap­pen — those are just ads,” said Amy Bach, ex­ec­u­tive di­rec­tor of United Pol­i­cy­hold­ers, a San Fran­cisco-based ad­vo­cacy group.

“In re­al­ity, in­sur­ance poli­cies are writ­ten by teams of lawyers, and it can be rough for home­own­ers,” she said.

Most home­own­ers in­sur­ance cov­ers both your home and all prop­erty within. More than 90% of home­own­ers buy cov­er­age, ac­cord­ing to re­cent es­ti­mates, and as many as 40% of renters pur­chase in­sur­ance for their


Af­ter the re­cent drought turned Cal­i­for­nia into a huge pile of kin­dling, in­sur­ers racked up bil­lions of dol­lars in fire-re­lated claims. Some, such as All­state, stopped writ­ing new poli­cies. Oth­ers, such as Farm­ers and State Farm, be­came choosier about homes they’d cover.

The in­sur­ance in­dus­try says it’s ready to han­dle claims from the fires now rag­ing statewide.

“In­sur­ers will 100% be there for home­own­ers,” said Ni­cole Gan­ley, a spokes­woman for the western re­gion of the Prop­erty Ca­su­alty In­sur­ers Assn. of Amer­ica, a trade group. “In­sur­ers are mov­ing very quickly to help pol­i­cy­hold­ers.”

Be that as it may, cov­er­age may not al­ways be easy to ob­tain.

Home­own­ers in high­risk ar­eas who can’t find cov­er­age in the open mar­ket may have to turn to a state­spon­sored pro­gram called the Cal­i­for­nia FAIR plan. FAIR cov­ers as much as $1.5 mil­lion for a struc­ture and its con­tents, which in some cases won’t be enough for full re­place­ment of a lost home and prop­erty.

If there’s one take­away from the blazes now caus­ing wide­spread dam­age in the Golden State, it’s for home­own­ers and renters to make sure their cov­er­age is up to date — and that noth­ing sneaky has made its way into your pol­icy.

Nar­beh Shir­va­nian, a Glen­dale lawyer who han­dles fire-re­lated claims, said it’s not un­heard of for an in­surer to change the terms of a pol­icy dur­ing the re­newal process.

“It might be dis­closed,” he said. “But let’s be hon­est, no­body re­ally reads all this stuff.”

As a re­sult, you may find that you’re shoul­der­ing more of the risk than you orig­i­nally thought.

Shir­va­nian also warned of seem­ingly ar­bi­trary re­sponses to fire claims. If a struc­ture burns down, then all le­git­i­mate in­sur­ance claims will be hon­ored.

But what if there’s a wild­fire nearby and your home is im­pacted by smoke and ash? Will your home­own­ers cov­er­age pay for the cleanup?

“We’re see­ing is­sues with smoke and ash dam­ag­ing homes and in­sur­ance com­pa­nies play­ing games,” Shir­va­nian said. “One year they do one thing, one year they do some­thing else.”

It’s very im­por­tant as the econ­omy re­cov­ers from the Great Re­ces­sion to be mind­ful of ris­ing prop­erty val­ues. Yes, that’s great from a maybe-I’ll-sell per­spec­tive. From a fire per­spec­tive, it can be a whole other thing.

Re­place­ment costs you locked in for your in­sur­ance pol­icy may no longer re­flect cur­rent con­di­tions, mean­ing you may have to reach into your own pocket to make your­self whole.

Also, wide­spread fire dam­age will be felt in the mar­ket in the form of ris­ing costs for ma­te­ri­als such as wood and con­crete, and al­most cer­tainly higher la­bor costs as con­trac­tors take ad­van­tage of sup­plyand-de­mand sit­u­a­tions.

A smart idea is to pay a lit­tle ex­tra for what’s known as an ex­tended re­place­ment cost en­dorse­ment. This is ba­si­cally ad­di­tional cov­er­age in­tended to ac­com­mo­date at least a por­tion of any un­ex­pected cost in­creases.

You can also pur­chase ad­di­tional cov­er­age for code up­grades. For ex­am­ple, the rules might have changed for elec­tri­cal sys­tems or in­su­la­tion since your house was built. Code-upgrade in­sur­ance will pro­tect you from so-called bet­ter­ments that your ba­sic pol­icy might not ad­dress.

“In­sur­ance com­pa­nies have had enough ex­pe­ri­ence with fires in Cal­i­for­nia to do a good job of re­solv­ing claims,” said Bach at United Pol­i­cy­hold­ers. “But that’s still not al­ways the case.”

I strongly ad­vise home­own­ers and renters to take their smart­phones and walk around their homes shoot­ing a video of their be­long­ings. This can pro­vide help­ful ev­i­dence if an in­surer dis­putes, say, that you owned a state-of-the-art home-the­ater setup.

If you have to evac­u­ate, save all re­ceipts. Many home­own­ers poli­cies in­clude so-called ALE cov­er­age, as in “ad­di­tional liv­ing ex­penses,” which will in­clude costs such as ho­tel rooms, food and rentals.

For more info, you can reach out to the state Depart­ment of In­sur­ance via its con­sumer hot­line: (800) 927-4357.

Gina Fer­azzi Los An­ge­les Times

HOME­OWN­ERS and renters should make sure their cov­er­age is up to date. Above, neigh­bors con­sole each other this week in front of an Ana­heim Hills home.

Brian van der Brug Los An­ge­les Times

IT’S NOT un­heard of for an in­surer to change the terms of a pol­icy dur­ing the re­newal process. Above, Ed­ward Wright tries to get into a safe that was in the garage of his home in Santa Rosa, Calif. The house was de­stroyed by fire Mon­day.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.