We’ve all seen the devastation of the California fires. It’s heartbreaking, but it also brings to light a few key steps all homeowners can take now to avoid insurance and claims issues in the future.
Pay Attention to Your Renewal Documents
The homeowner’s insurance market in all states is volatile right now. Speaking to California specifically, the state faced the extreme as carriers didn’t renew policies for many homes they had previously insured for decades.
What we’re seeing now is that insurance companies are re-underwriting policies each year at the renewal. A misconception in insurance is that once an insurance carrier insures a home, then they will stay on that risk for as long as the homeowner would like it. This is not the case. Insurance companies renew their policies once per year in order to re-underwrite and re-price the risk. This can lead to insurance companies deciding they will not renew a policy due to increased risk.
We’re also seeing more direct carriers reevaluating their books of business. This means they are taking rate increases and adding different stipulations in their renewals. For example, they may now add high wind and hail deductibles or non-renewing policies.
The important takeaway here is to stay involved in your insurance. Read the renewal documents you receive in the mail from your insurance company. These outline any changes that may be happening with your upcoming renewals as this is the time insurance companies are able to make deductible changes, reduce coverage, etc. These mailed renewal documents are their only required notification to you.
Additionally, if you receive a letter of non-renewal, you should immediately reach out to an insurance agent to see if they can find you comparable coverage at a comparable price. The last thing you want is to realize the day before your expiration date that you will no longer have coverage.
Validate the Insurance Coverage Amount
Another good step to take is to ensure you have your home insured for the correct amount and with an added layer of protection. If your area is impacted by a large natural disaster — tornados, hurricanes, wildfires, etc. — and your home needs repairs or to be rebuilt, all of your neighbors will likely need to do the same. This increase in demand will increase the cost of construction.
For example: Let’s say your insurance company has estimated that if your home was destroyed in a housefire, the cost to rebuild it similarly would be $1,000,000. The extra benefit you should look for in your policy is the “additional replacement cost.” This will give you typically an extra 25%, 50%, or 100% to rebuild your home. If you have an extra 25%, this would give you an extra $250,000 as a cushion to rebuild your home. The best option our carriers offer is true guaranteed replacement cost. This means they have agreed to pay whatever it costs to rebuild your home, even if they only insure it for $1,000,000 on the policy limits page. So, if the total end cost to rebuild is actually $1,750,000, your insurance company would pay this amount.
Keep Loss Prevention in Mind
The last takeaway is loss prevention. Our insurance carriers typically go out to clients’ homes in the western states and provide a report. As part of this, sometimes clients are required to cut down brush or take down large trees that are located next to their home. Some clients are reluctant to do this because of the aesthetic look of the tree or shrubs. California has taught us that removal of brush, trees, etc. could potentially help save your home when it comes to a large wildfire.
We also have clients that have invested in sprinkler systems in their eaves and surrounding their home to reduce the likelihood of their home burning in a fire. We anticipate this will become more common as homes are being rebuilt in California.
Reach Out for More Information
If you have any questions or simply want more tips to keep your home and belongings safe, please don’t hesitate to reach out to us today.
