What You Need To Know About Wildfires and Insurance
Wildfires have become a growing concern for many homeowners as drought conditions have spread across the country in recent years. According to a 2019 Corelogic report, 775,654 residential homes in 13 western states were at risk of wildfire damage. By 2020, the figure had risen to 4.5 million. In addition, wildfires destroyed over 17,700 homes in 2020, with California homes accounting for the greatest number of losses. It is a wise decision to insure your property against the financial impact of a wildfire.
What Is Wildfire Insurance?
Wildfires are typically covered by standard home insurance policies from state-approved insurers. Things are still changing. Since 2017, and as wildfire damage in the West has increased, insurers in high-risk states have raised premiums. "It's critical to review the covered and excluded perils in your policy or quote to ensure that wildfire is a covered peril," says Ivan O'Neill, a certified wildland fire assessor and CEO and co-founder of Madronus Wildfire Defense, which assists homeowners in reducing their wildfire risk.
Insurance coverage varies, but it should typically cover smoke and fire damage to:
- Your home’s building or structure
- Any outbuildings on the property, such as a garage, shed, or apartment
- Landscaping, pool, patio area, and contents
- Debris removal
- Personal belongings or contents of the home
- A building code upgrade could be required or optional.
- Additional living expenses
What Will Your Insurer Pay in the Event of a Wildfire?
Because each policy is unique, you should double-check your limits and coverage. "If you live in a wildfire-prone area, make sure you're not under-insured," O'Neill says. "This means that if your home is destroyed, you'll receive enough money to rebuild a home with the same features at current new-build prices."
Replacement Cost Value or Guaranteed/Extended Replacement Cost
The type of coverage that allows you to rebuild at current new-build prices is known as replacement cost value (versus actual cash value), and it covers the actual cost of rebuilding your home up to a certain limit.
O'Neill recommends asking a realtor or general contractor what the current cost to build per square foot is in your area and multiplying it by the square footage of your home to ensure you're fully covered.
Some states also have policies that offer guaranteed/extended replacement cost, which replaces your home regardless of whether the cost of building supplies or labor rises after the disaster as many people try to rebuild all at once; however, this coverage is typically more expensive.
Furthermore, building codes in some areas have changed significantly over the last 30 years, so people looking for policies in wildfire-prone areas should consider getting insurance that provides updated building code coverage during a rebuild. This ensures that you have enough funds to construct your new home in accordance with current building codes.
Another thing to think about is loss-of-use coverage, also known as additional living expense coverage. "This coverage is generally inexpensive and covers the cost of hotels and other expenses incurred while you are unable to use your home during an evacuation or rebuild," O'Neill says.
Additional Peace of Mind
In addition to your insurance coverage, you may find Wildfire Response Endorsement or Wildfire Defense Services useful. In wildfire-prone areas, it may make sense to pay a retainer for this service, which is equivalent to having a private fire department on standby if a wildfire threatens your home. The cost varies by company, but some insurers, such as State Farm, have recently made this coverage available to all policyholders.
When a wildfire threatens your home, a class 6 fire engine team (complete with wildland brush trucks) is dispatched to assist in hardening it, closing windows and doors, clearing defensible space, installing sprinklers, and laying flame-retardant foam.
Where Can You Get Wildfire Insurance?
If your homeowner's policy does not include wildfire insurance, contact your insurance company to see if you can get it. If you can't get coverage because you live in a high-risk area, you might be able to find a FAIR plan, which is a state-mandated programme that provides fair access to insurance for high-risk properties.
Admitted insurers are non-renewing customers in many areas near those that have lost a large number of homes to catastrophic wildfires. However, after a catastrophic wildfire, many states' insurance commissioners declare a one-year moratorium on non-renewals. You can also appeal if you are not renewed by an insurer.
You can also seek assistance from your state's insurance commission. Consumers should document (take before and after photos, keep receipts for materials and contractors) and include all home hardening and defensible space work they've done to prevent wildfires, according to O'Neill, and then contact their agent to share the documentation and request a formal appeal.
If you are not renewed, your only option is to purchase coverage from a non-admitted carrier (one that has not been approved by your state's insurance department), which typically costs three to six times the price of admitted carrier home insurance. You can also purchase insurance from your state's last-resort insurer, which pools high-risk individuals and is likely the most expensive option.
Finally, O'Neill advises homeowners in high-risk areas to videotape their homes and contents on an annual basis (not just photos since images can be photoshopped and are less trustworthy). Open drawers, doors, closets, and storage areas room by room to document your belongings. Noting the serial number, make, and model of electronics and other high-value items is beneficial. Make a copy of the video and save it to a cloud storage service like Google Drive, Dropbox, or iCloud.
How Are Claims Settled in a Wildfire Insurance Case?
To seek compensation, the insured must typically file a claim form within 15 days of the date of the fire. The claimant must submit photographs of the damages. Though clearing debris and cleaning up is beneficial, do not destroy any evidence of the fire or damage until the claim has been processed.
Can an Insurer Deny a Claim for a Wildfire?
Insurance companies have the right to deny a claim if they believe the amount of damage claimed is excessive or exaggerated, or if the homeowner's policy was in arrears at the time of the fire. Maintain your insurance policy payments!
What Is a Wildfire Smoke Claim?
You may file a smoke claim if your home was not destroyed 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 contents, and may be grounds for a wildfire smoke claim.
The Bottom Line
Your homeowner policy should cover a wildfire in most non-wildfire-prone areas. "The best insurance claim is one you never have to make," says O'Neill. "It's critical that people educate themselves about wildfire risks, harden their homes, and manage vegetation to create defensible space around their home."