Wildfire raises questions about adequacy of insurance coverage
LOUISVILLE, Colorado – The stories of loss are heartbreaking.
“It’s horrible, but you survive horrible things,” said Joseph Reid, who lost his home in the Marshall fire.
Reid believes his house was seriously underinsured.
“No one should ever have written such a poorly funded policy,” said Reid.
Due to his concerns and others, we take a closer look at this question by answering four major insurance questions that arise after the catastrophic Marshall fire.
How do you know if your home insurance policy has adequate coverage?
The best line of defense is to call your agent to make sure you have adequate coverage.
“We all need to see our insurance professionals at least once a year,” said Carole Walker, CEO of the Rocky Mountain Insurance Association. “How much do I have? “
Experts like Walker say the Marshall Fire is a wake-up call for all homeowners and tenants.
“These days when I say, ‘I’m putting off my insurance. I procrastinate every year to take inventory of my things or to talk to my insurance agent. “Those days really must be over,” Walker said. “Because, as we have seen, the unthinkable can happen in an instant. “
Don’t confuse the market value of your home with replacement costs.
Replacement costs can be lower or higher than market value, depending on where you live and the construction costs in your state. They tend to be below market value in Colorado.
“What the insurance company cares about isn’t the market value or the value you could sell your house for, which we know in Colorado is a lot these days,” Walker said. “Rather, they care about the cost of repair and rebuild in today’s dollars.”
Most insurance companies issue a policy based on replacement costs plus about 20% for inflation.
Walker says insurance companies are also realizing that construction costs are rising.
“There is a shortage of contractors, a shortage of supplies like lumber and paint,” Walker said. “It’s likely going to inflate costs and take longer to get the job done due to the delays we’re seeing in this new normal.”
Update your policy based on upgrades.
Any improvement to your home adds value. Experts suggest updating your policy based on improvements to your home, even if it means your premiums go up a bit.
“It’s not a lot out of pocket,” Walker said. “Don’t cut corners on that. It will make all the difference for you in this recovery.
Walker says home improvements or additions you’ve made often add value.
“During COVID, you tricked the bridge. These are all things that are going to cost more to replace and rebuild, ”Walker said. “If you put on a new tile and you’re like, ‘Hey, it would cost me a lot more to replace that special tile that I got from Italy,’ that’s when you need to call your agent. “
FEMA coverage can help fill some gaps, although insurance should be your primary clawback mechanism.
“Go ahead and sign up with FEMA because it can cover the deductibles, the underinsurance,” Walker said. “If you find that you are underinsured or have no insurance even though you are a renter, this is where the FEMA money comes in.”
Finally, Walker suggests patience in the process.
Sometimes insurance companies pay the depreciated value of your items now and then write you another check for the difference when you go out and buy items like a new TV or furniture.
“People always worry about getting a check that is much lower than they think their business is worth,” Walker said. “I know there is a lot of fear. People are still in shock. We’re only a week away.
Some companies, like State Farm, allow you to add items to your claim for up to two years after a disaster.
Bottom line, Walker says, as the owner, it’s all about due diligence.
“If you’re sitting there saying, ‘I don’t even think about my insurance until I have to file a claim,’ now is not the time to think about your insurance because then it is too late, ‘ Walker said. “More than half of Colorado’s population lives in areas at high risk for forest fires. There are tremendous risks in Colorado in our urban settings. It is a wake-up call to all of us that we live where we live.
Walker says insurance agencies are still under very little demand from the people who sit down with them and periodically review policies.
“You can’t afford not to take this exam,” she said. “Think of your insurance as a financial investment, much like you would your 401k. “
“I can only hope that we can get the insurance company to take a bigger view,” Reid said. “Take a humanitarian perspective. There’s no way in hell that [our home] can be rebuilt at this level of coverage.