As wildfires spread across Colorado and the country, we wanted to provide information on having coverage in the event a wildfire damages your property.
If you’ve discussed insurance with me you know that my goal as an insurance agent is to provide customized guidance on how much insurance each family needs. For your homeowner’s insurance, the amount of dwelling coverage you have is important because that is the maximum covered amount insurance will pay if your home is completely destroyed.
Are you appropriately insured?
United Policyholders is a non-profit organization that helps people better understand insurance coverage. They have several employees and volunteers that were directly impacted by a natural disaster and have decided to use that experience to help others. In a recent presentation with The City of Longmont Landlord Training Alliance, they referenced homeowners they’ve supported after a natural disaster being underinsured on their dwelling coverage up to 6 figures.
Have interior and exterior features been inventoried and included?
The dwelling amount on your policy will be calculated by your agent. All major insurance companies have software they use to estimate what it would cost to rebuild your home (typically called ‘Replacement Cost Estimator’). It is up to the agent, and you, to make sure that the inputs into the software are accurate. The size and foundation of the home are obviously factored into the cost to rebuild your home. In addition to that, the quality of finish for the kitchen and bathrooms and the details you have in your home also impact how much it costs to rebuild your home.
Kitchen and bathrooms can have a wide variety of features and quality of finish. If you have a kitchen with custom cabinets and counter tops, make sure your agent factors that into the replacement cost estimator. If they just selected a standard finish in your home, then you will likely not get enough money from your insurance policy to rebuild your kitchen as is without paying out of pocket.
Upgrades to your home can also add up in the cost to rebuild your home as it is today. While there are a lot of upgrades and features in a custom home, there are several common interior and exterior features in homes that need to be added to the replacement cost estimator like – molding, curved staircases, recessed lighting, cathedral or vaulted ceilings, chandeliers, pillars or columns, picture windows, and sliding glass doors.
Remember, the purpose of insurance on your property is to make you whole again. Make sure you have the right coverage and enough coverage to do that.
Are additional endorsements a wise investment?
When needed, there are some common endorsements that add additional coverage to the dwelling amount that are inexpensive enough to have on all policies:
- Extended dwelling coverage, typically adds 25% or 50% of additional coverage. The coverage will help in the event the replacement cost estimator was too low. It’s important to be careful here, extended dwelling coverage won’t provide additional coverage for a custom kitchen when the agent enters a standard kitchen. So, it is important that this type of coverage is set up correctly to begin with. I’m happy to explain this in greater detail.
- Ordinance and law coverage will pay for additional costs to rebuild the dwelling to current code.
You should also be aware of the amount of personal property coverage you have and limitations for specific items. For example, jewelry, rugs, art, and tools often hold limited coverage. I review valuables with my clients to determine if a floater or endorsement policy is warranted in order to have enough coverage.
Be sure to periodically take photos or video of your home, walking through each room, documenting finishes and special touches in your home. Remember to open drawers and closets to record valuables. For more expensive items show the make and model.
Additional Living Expenses
The last insurance coverage that will be helpful to you is additional living expense coverage. This coverage will pay for expenses you have if you are not able to live in your home. While the Red Cross and local shelters have options for short term arrangements, rebuilding can sometimes take years so it’s important to have some peace of mind that these costs can be recouped from your insurance.
Mitigation and prevention
There are several resources available on what you can do to create a higher level of safety for your home. Common recommendations include clearing debris from your yard, maintaining a distance between trees and your home, having a hose long enough to reach around your house and your roof. Your municipality will likely have resources to help with mitigation, be sure to check in with them. Some insurance companies partner with companies that work to provide additional protection for your home. One way they will help is if your property is at risk of a fire, they will come and implement fire prevention measures around your home including potentially laying flame-resistant material.
I know it is difficult to think that a natural disaster will impact you, yet I like to encourage people to take precautionary steps when they can. Even if you have minimal wildfire risk it is still good to review your coverage for homeowners, condo owners, rental owners, and renters. Take the time to look over your policy or review a loved one’s policy that may be at greater risk.
Thank you to everyone helping fight the fires and helping those in need.
To your financial success,