The firestorm that began burning through Sonoma County on the night of October 8 last autumn has affected everyone in our community in some way. By now, most people with homeowners and renters insurance should have received significant advances on their insurance policies.
Though most people buy homeowners’ or renters’ insurance, many never take the time to truly understand their policies. In the aftermath of the wildfires, many policyholders in the North Bay are reviewing their policies and learning more about what the coverage entails. This terrible disaster has caused many people to review their policies and learn exactly what they’re covered for. Policies from carrier-to-carrier vary, so be sure to talk to your insurance agent to understand the details of your policy.
Homeowner’s insurance should provide a sense of security to the policyholder, knowing that their home, the contents inside, and any liability arising at their residence is covered if a disaster were to arise. To gain this sense of security, the policyholder should be confident that their policy reflects the coverages specific to their needs. The best way to ensure your policy has adequate limits and includes any additional coverages that are specific to your needs, is to review your home and contents with a licensed agent. Here are the basic elements of a homeowners’ policy to get you started:
•Coverage A: Dwelling Limit. This is the amount of coverage for your home on your policy. Most policies have some form of an “extended replacement cost” endorsement. This is typically a percent of your dwelling limit. For example, if your policy states that you have a $500,000 dwelling limit, and your policy includes an “extended replacement cost” endorsement for 125 percent, then your policy will provide $625,000 ($500,000 x 125 percent).
•Coverage B: Other Structures. This is the amount of coverage for additional structures on your property. Typically, this is 10 percent of your dwelling limit. This coverage includes fences, decks and outbuildings.
•Coverage C: Contents Limit. This is the amount of coverage for personal property in your home such as furnishings, art, clothing, appliances and more. Generally, this amount is between 50 to 70 percent of the dwelling limit. Keeping receipts for large purchases is ideal, but documenting contents with pictures or video will suffice. It’s important to speak with an agent about what kind of content is in the home. Items such as jewelry or solar panels may fall under an “additional coverage,” and may need a separate endorsement added onto the policy to be covered.
•Additional Living Expenses (ALE). This coverage includes the amount on your policy to pay for additional living expenses incurred while you are displaced. Often times there is no limit to the dollar amount of ALE, but there is a time limit. The most common ALE time limit is two years, but this can vary between policies. During that time, keep track of your living expenses, which may include hotels for short-term needs, or rent for long-term losses. Your insurance policy also includes a clause called "loss of use," which means that the insurance company reimburses you for your living expenses, while displaced from your damaged home.
•Smoke Damage. Contents damaged by smoke is covered under most policies, even if your home wasn’t directly damaged by fire.
If you’re renting an apartment or house, it’s just as important to buy coverage for your personal property. All renters should understand that any policy your landlord carries, does not cover your personal property. Like a homeowner’s policy, renter’s insurance offers personal liability, contents coverage, additional living expenses and coverage for smoke damage.
Be sure to have routine insurance checkups with your agent. Many longtime homeowners are finding that the cost to rebuild is skyrocketing due to demands on labor and materials. Talk with your insurance agent to review your current policy limits to make sure they are adequate to rebuild your home in the event of a significant loss. You should also document what you have in your house as best you can. A good start is to take a quick walk through your house with your phone to video its contents is a good start.
We’ve been hearing for years that one day people will no longer need an insurance agent for home and auto insurance. Everyone will be buying coverage online from Flo or the gecko because they think it’s faster, cheaper and easier. But the firestorm proved this theory is wrong. It’s important to have an insurance agent you can trust, and one who’s there to deliver on the policy’s promise when disaster strikes.
The October firestorm has shown that people need an insurance agent now more than ever. They need an agent to talk through their needs, help determine adequate limits and coverage. And most importantly, to advocate for policyholders through the claims process, which can be overwhelming and confusing. It’s our job to help our clients understand their coverage, the process and to make sure they are getting the communication and payments they deserve from their insurance company.
Robb Daer is a principal at George Petersen Insurance Agency. He has over 20 years of experience in the insurance industry. You can reach Robb at 707.525.4177 or firstname.lastname@example.org. For more information, go to www.gpins.com.
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