Does Homeowner’s Insurance Cover Wildfires?

With significant droughts being experienced across large areas of the western, southwestern, and midwestern United States, for the 4.5 million homeowners in fire-prone areas there’s one question that’s on everyone’s mind: if my house burns down, will my insurance cover it? It’s no surprise this is keeping many of us up at night; losing your home is bad enough, but if your insurance can’t cover it, for many people this could be a one-way ticket to bankruptcy.

Does Homeowner’s Insurance Cover Wildfires?

The good news is that most homeowners’ insurance policies will cover wildfire damage as a matter of course. In fact, there are usually several coverage types that will help you repair or rebuild your home, replace your belongings, and even help you and your family find temporary accommodation if it’s not possible to live at home.

Dwelling Coverage

Dwelling coverage is a simple form of coverage that will pay to replace or rebuild the physical structure of your home as well as any attached structures such as decks or lean-tos. This type of policy usually has a fixed upper limit, often based on the cost of materials needed to rebuild your entire home, although it’ll also cover labor costs based on your local area. Always makes sure that you keep your dwelling coverage up to date, as the cost of rebuilding your home is likely to change over time.

It’s worth noting that shortages of building materials can easily push up the cost of rebuilding, and if a large neighborhood is burnt down or damaged by fires, then the increased demand for labor and materials will likely cause a price surge. It’s usually a good rule of thumb to make sure you’re covered for more than you think you’ll need to be absolutely sure that you’ll be covered.  

Extended and Guaranteed Cost Coverage

Extended cost coverage is an extra add-on available with some insurance policies that’ll cover you for a certain percentage over the agreed coverage amount; usually about 25%. This is designed to protect you against unpredictable price surges and can give you a much-needed cushion, so you’re not left out of pocket for the cost of completing the rebuild of your home.

However, if you really want to be sure your home will be replaced in full, opt for Guaranteed Cost Coverage. This is a further extension of your policy, which will ensure that, no matter what the cost, your home will be replaced in full. This add-on is designed to ensure that you have total peace of mind, by ensuring that no matter how much of a price surge your area sees, you’ll still get your home rebuilt.

Other Structures Coverage

While dwelling coverage will protect your actual house, and anything attached to it physically, it will not cover the cost of repairs to any detached structures. This could be as simple as a detached garage if you live in the suburbs, or a full set of outbuildings and barns if your property is out in the sticks.

It’s a very good idea to have this if you’ve just spent a significant amount adding a structure such as a gazebo. Don’t forget that swimming pools are classed as structures as well, so if your pool’s outside, then you’ll need this level of coverage to be sure that it’s covered.

Personal Property Coverage 

This level of coverage is the next step up and covers the contents of your home. While this covers your possessions, it’ll also cover furniture, kitchen appliances, and electronics. The personal property coverage level is usually based on the figure set by your dwelling coverage and is usually between 50-70% of that level. For example, if your dwelling coverage has a limit of $500,000, and your personal property coverage is set at 50%, then your property will be covered up to $250,000.

Making a Home Inventory

If you have this type of cover (and you definitely should), then you’ll need to make a home inventory. A home inventory is a list of all your possessions, and how much they would cost to replace if they were all destroyed by fire. Remember, you won’t have time to do this if you have to evacuate!

It’s important to keep this list up to date, as you might not be able to claim for something if it’s not listed. When you’ve added up the value of your possessions, compare it against your level of cover. If it falls short, talk to your insurance provider. You can usually increase your cover level.

Additional Living Expenses Cover

Additional Living Expenses Cover, or ALE, will pay for expenses such as a stay in a hotel, restraint bills, and other costs if your home is unlivable for a time. It’s sometimes known as “Loss of Use” cover. As well as proving cover for you, it’ll also pay for pet boarding fees.

ALE cover will provide you with enough to maintain a “normal standard of living”. This means that you’ll need to live in a similar kind of home or apartment to the dwelling you lost, but you’ll need to negotiate with your insurer exactly what will be covered. This is another thing that is best decided in advance, as this is not something you want to be discussing with a wildfire bearing down on your home.

How Long Will I Be Covered For?

ALE usually sets either a time or dollar limit on the cover and sometimes both. It’s often worded as “the shortest time required to repair the damage…or settle elsewhere”. Time limits vary, so make sure you’re certain of how long you’re covered. Things become a little more complicated if your home is only partially damaged. Be aware that there may be less-than-obvious dangers to living in your home. This could include if dangerous materials like asbestos were exposed, or smoke residue in the walls – particularly harmful for young children.

ALE will often be limited for temporary evacuations, say if your entire community is ordered to evacuate but your home isn’t actually damaged. This will be covered in the “Civil Authority Prohibits Use” section of your contract. It could be around two weeks. It’s unlikely that ALE will be triggered unless your home is actually unlivable: loss of water or power will probably not trigger it.

Trees, Shrubs, Lawns, and Plants Cover

Your home insurance policy will often cover items in your garden or yard in much the same way as personal property insurance. It’ll usually cover up to a certain percentage of your dwelling cover, often about 20%.

For example, if you are covered up to $300,000 on your primary dwelling cover, then you’ll be covered up to $60,000 to replace your plants and trees. However, this often comes with a caveat that the insurer will not pay more than a certain amount for any one item. This could be about $1,500.

What about Condo Insurance?

Condo insurance is not quite the same as dwelling insurance; however, it works in much the same way. It’ll cover fire damage to the “inside walls” of the condo, while the Homeowner’s Association should have a “master policy”, that covers the exterior, such as the outside walls and roof.

A condo insurance policy will cover your possessions and additional living expenses if your condo becomes uninhabitable due to damage covered by the policy, such as wildfires.

Wildfire Prone Areas

If you live in an area that’s particularly prone to wildfires, it could be hard to find affordable insurance. Some companies will charge much higher insurance premiums due to the higher risk or may decline to insure you at all if your home is in an especially high-risk area such as parts of California.

If you find yourself in this unfortunate situation, then it’s worth shopping around. Not all insurers offer the same premiums, and it might be possible to find a policy cheaper than you think. For example, if you’re in California, here at ISU Armac Insurance Services, we can provide you with a very competitive quote quickly and easily.

Clear Vegetation to Keep Costs Down

One surprising way you can keep your insurance affordable is to keep on top of the vegetation near your house. While this may seem surprising, having little to no vegetation near your property can dramatically increase your home’s chances of surviving a wildfire. Your insurer knows this – and they may be able to get you a better quote if you promise to clear vegetation or inform them it’s already done.

If you want to find out more about how to get comprehensive and affordable protection for your home and possessions, then it’s time to visit us at ISU Armac Insurance. As a small, family-run company, we’ll be happy to work with you to find a solution that’s tailored to you and your home.