We hope that your home is never destroyed by a fire, because we’ve seen the aftermath. Southern California’s Santa Ana winds can make a simple fire widespread and deadly, and can burn a home to the ground. We’ve dealt with homeowners who have lost everything and this is just the first shock.
Some of these people have found out that this isn’t the worst part of losing your home. The worst part comes when you submit the insurance claim, only to find out that you’re underinsured.
According to a 2008 survey from industry watchdog United Policyholders, over 75 percent of claimants from San Bernardino and San Diego counties experienced this devastating scenario. The same survey found that these victims of wildfire were underinsured by an average of $240,000.
Even in California’s high-priced real estate market, that’s a huge chunk of change when it comes to a home price! And why the discrepancy? Mainly because many Californians don’t realize that there’s different types of home insurance available, and some are more restrictive than others. There’s a big difference between insuring your home for cash value versus replacement cost, and there’s three types of replacement-cost coverage:
- Guaranteed replacement-cost coverage: Guaranteed replacement-cost coverage offers the broadest protection. Under guaranteed replacement-cost coverage, the full cost to repair or replace a residence is payable for eligible risks described in your home insurance policy.
- Extended replacement-cost coverage: Like guaranteed coverage, extended replacement-cost coverage pays repair or replacement costs beyond basic policy limits. Extended replacement-cost coverage is capped by additional dollar or percentage amounts.
- Basic replacement-cost coverage: Basic replacement-cost coverage has a single set of limits for home repairs or replacement, often much lower than the upper range in extended or guaranteed replacement-cost policies.
Although usually less expensive, actual cash-value coverage can leave homeowners woefully underinsured, as it deducts your home’s physical depreciation from eligible repair costs. If your home is fully destroyed, actual cash-value claims are limited to the fair market value of the home at the time of loss. Although the real estate market here seems to be recovering, it’s not a smart gamble to take, especially if you are in an area where wildfire damage is a real and present danger.
Many parts of Riverside and San Bernardino counties are vulnerable to wildfires. In fact, the insurance company will check the location of your home to see if you are in a fire hazard area before issuing a policy. So if you’re in an area that has seen a lot of wildfire action in the past, you really need to read the fine print on your homeowners policy.
Does this all seem very complicated? It can be. But don’t worry. You can call your insurance agent and have them check your coverage before anything bad happens. But if something does happen, call us—we have been dealing with insurance companies for years, and can easily navigate all of their tricks and red tape. Whether it’s fire, water or mold restoration, or just a remodel for a home makeover, give us a call! We’re in the business of getting your life back to normal as soon as possible. (877) 732-8471