After surviving the 2007 October Wildfires that destroyed several homes in Rancho Bernardo, two very important insurance consumer truths became apparent to me that must be shared with you, your family, friends and clients. Although fires can strike at any time, the most dangerous fire season is from 10/15 - 10/31 so please take note.
1.) Adequate Insurance Coverage: Your home is your most valuable asset and you must protect it. As a homeowner the odds that you are currently under-insured in the event of a total loss are high. Under-insurance, especially in the dwelling amount, is the single largest issue facing survivors of the CA 2007 Wildfires. Take action NOW to review your policy.
- Retrieve your Policy Declarations Page. What is the dwelling amount? Take that amount and divide it by the square footage of your home. As of October 2008, if that figure is not between $220.00 - $350.00 per square foot for the State of California, you are probably underinsured and need to contact your insurance company to explore increasing your limits. For other States, check your area for the current building costs per square foot. (Do not confuse this with current market value).
- Review the other areas of your policy. Do you have Full Replacement Coverage? Building Code Upgrades? Adequate Additional Living Expense (ALE) - with a suggested amount of 2 years? (The reality of how soon you would get through a total loss is underestimated).
- Review your policy limits annually. My home was underinsured in October of 2007. We increased the limits after the fire, and as I write this blog a year later, an increase was needed again!
2.) You, Not Your Insurance Company, are Responsible for Setting Adequate Policy Limits. Believe it or not, recent California Appellate Court decisions have upheld that it is the responsibility of homeowners to set their policy limits based upon their reconstruction calculations, not the amount the insurance agent calculates. In addition, they ruled that insurance companies are not obligated to annually adjust policies to keep up with inflation (which affects the value of the replacement cost).
Bottom line, it rests on the consumer until laws can be improved. It is important to consult with your agent and other credible sources, but do not accept their calculations at face value. Do your homework. Go to www.unitedpolicyholders.com for helpful consumer information. I know one Rancho Bernardo couple who prior to losing their home in the 2007 fire did a major remodel. The amount of coverage their agent suggested after the remodel was less that it had cost them to remodel! The couple was savvy enough to figure this out, and actually "pushed" the agent to obtain additional coverage to match their remodel costs. Today, they are thankful that they had the presence of mind to question the agent's suggestion. They are just starting to re-build and are not facing the added financial burden on top of the devastating emotional turmoil of a total loss.
The realities involved in a total loss are overwhelming. Recent survey results from United Policyholders, a non-profit insurance consumer advocate group, show that 75% of 2007 San Diego and San Bernadino County respondents were under-insured in the dwelling amounts, and that the average amount of under-insurance was $240,000.00! Take the time to review your policy and get educated on your coverage - Your peace of mind and financial stability will depend on it.
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