Wildfires have become more common in the last decade, and they are likely to keep increasing in both frequency and strength due to high levels of climate change. While people around the world have seen the damage these natural disasters do on the news, not everyone is aware of the financial impact such an event has on the residents. If you’re concerned, taking out a high fire risk insurance policy could set your mind at rest.
A high level of insurance can help you to find a new place to live while your home is uninhabitable, keep covering your mortgage payments and repair your property, and replace the personal items that you’ve lost as a result of the fire. While it has been difficult to find great policies in the past, this is changing, and some insurance companies are offering plans specifically aimed at people like you. Let’s have a closer look at insurance and wildfire risk.
What Happens If a Wildfire Burns Down Your Home?
Watching your home burn down because of a wildfire is a traumatic experience. No matter if there is simply some cosmetic damage or the whole property is destroyed, you’ll undoubtedly lose many valuable objects, and you’ll need to look for a different place to live while your home is being re-built. This can be a real problem if you’re not insured, especially as you’ll most likely have to continue paying down your mortgage.
Fortunately, most people have some kind of insurance that can cover the expenses of living in a different place, paying the interest on their mortgage, and replacing the personal property that was destroyed. Policies vary, which is why it’s crucial that you read yours closely and find out exactly which expenses will be covered and which ones you’ll need to pay on your own.
If You Have No Insurance
The vast majority of homeowners have some kind of insurance policy, particularly those who have a mortgage. However, once you’ve paid it off, there’s no requirement to keep your insurance, and some people decide to cancel it. Similarly, there are some people with a mortgage who don’t have a reliable and effective policy. If your house burns down and you aren’t covered, you’ll have to come up for all the costs on your own.
This includes paying off the rest of your mortgage if you still have one. Stopping payments could cause foreclosure and the loss of your home. What’s more, when a natural disaster occurs, your lender will find out that you have no insurance and might therefore choose one for you, often at a higher premium than you would otherwise get. For this reason, being proactive and getting your own policy is always better.
Loss of Use or Additional Living Expense Policy
Any good insurance company will offer homeowners a loss of use or additional living expense policy, which covers the place you will stay while your own home is uninhabitable. Usually, you will be able to maintain the same standard of living you had previously, so if you lived in a very large home, you should be able to rent a dwelling of a similar size.
Additionally, your policy will also cover additional costs you will incur, such as meals and laundry service. Make sure you keep all your bills and proof of expenses, so you can claim the money back from your insurance.
Dwelling Coverage Policy
In addition to the immediate need for shelter and necessities, you will also need to continue paying down your mortgage. When you first took out insurance, your property was valued, and you will be able to get this money back. Before making any decisions, remember that the bank will get paid first to prevent foreclosure or other negative consequences. Whatever is left can then be spent on rebuilding your home or purchasing a new one.
Carefully read through your policy to see how exactly dwelling coverage works in your case. Sometimes, it might include some money for closing costs on a new place or a monthly amount that can cover an increase in your mortgage rate. However, dwelling coverage policies are quite individual, so you’ll need to figure out what applies to your situation.
Personal Property Coverage
The other big consequence of a house fire is that you lose a large part of your personal property, such as furniture, valuables, and day-to-day items. Many policies calculate this as a percentage of your property’s value. For example, if your home is worth $500,000 and your property coverage is 50%, you will receive $250,000 to replace all of your personal items.
Alternatively, the policy might be based on replacement cost or cash value. Replacement cost means that you’ll receive the same amount that you paid for your items when they were new. If you purchased a table for $2,000 twenty years ago, you’ll get $2,000 today to replace it. However, if your policy operates on cash value, you’ll only receive what the table would be worth today if it were sold. This is usually much lower.
Other Avenues for Help
Whether you have insurance or not, there might be other people you can turn to for help. Family, friends, and unaffected neighbors are often happy to help, and there are certain charities that assist people like you who have suffered because of a wildfire. As an example, the Red Cross often helps people who have been hit by a natural disaster, particularly in an area where this kind of incident is common.
You may also receive some government assistance and benefits, but this will depend on your individual situation. All of these additional safety nets are vital, but they are not as extensive and guaranteed as your insurance. That’s why it’s always important to have a good policy as the first line of defense.
Finding Insurance and Protecting Your Home in a High-Risk Area
As climate change heats up our environment, the risk of wildfires increases in certain areas of the country, particularly in California. Unfortunately, this means that many homeowners are having trouble finding a good, affordable home insurance policy because the companies are worried about the level of risk they are taking on. They may charge you more, place a cap on the payout, increase your deductible, or simply refuse to cover you.
If you have experienced this problem, you shouldn’t give up just yet. Although there are Fair Access to Insurance Requirements (FAIR) plans for people who can’t otherwise get insurance, they are usually expensive and don’t cover you as well as other options. Instead of using this service, you should look for high fire risk insurance, which is a plan specifically designed for situations like yours.
Choose High Fire Risk Insurance
Every policy designed for people living in high fire risk areas will include living expenses, dwelling coverage, and personal property coverage. However, your insurance might also encompass some other benefits, depending on what your home is like and which structures you choose to get insured. For example, you might have other buildings aside from your main house, such as a shed, fence, or a detached garage.
Many policies will cover these structures, as well, and some will even help you to replace your vegetation. Trees, shrubs, your lawn, and plants can be included as a percentage of the value of your home, so you won’t have to worry about purchasing everything from scratch. In these ways, insurance specifically for high fire risk areas is tailored to your needs and can help you to get back on your feet much quicker.
Minimizing Your Damage
No matter how good your insurance policy is, you should always look to minimize your damage and protect your property as much as you can. There are certain strategies you can employ to make sure a wildfire won’t destroy everything you own. Most importantly, you should clear all the vegetation at the edges of your property because this can double the likelihood of your home surviving a fire without much damage.
Try to remove all the flammable objects at the perimeter of your yard, cut down branches overhanging your roof as they could transmit the fire to your building, and clear all your structures of vegetation. You could also join a local group that aims to minimize wildfire damage, as they will have a lot of ideas about how you can best save your property.
Protect Your Home
Living in an area with a high risk of wildfires can be dangerous and challenging, but many people don’t want to leave the home they have lived in for many years. A high fire risk insurance policy can go a long way to alleviating your fears and making sure that you won’t face hardship, even if your home is affected by fires. If you also take precautions such as removing vegetation at the perimeter of your building, you will be very well protected.
In the past, it has been difficult to find a great insurance policy in California, but fortunately, you have options now. Get in touch with us today at Armac Insurance to find out more about the various plans we offer for people in high-risk areas. Our agents will be happy to speak to you about your needs and help you put together the best policy for your home.