Malibu homeowners whose houses have burnt down in a wildfire have often learned the hard way that they did not have adequate fire insurance to cover their losses. Here are a few tips on how to review your own policy and avoid common mistakes. We checked with agents in two of Malibu’s largest insurance agencies, Virginia Barragan at B.W. Baker Insurance Services and Rene Williams at the Ball/Williams Farmers Insurance Agency, to get this advice:
- Living expenses – If a fire makes your house no longer livable, most fire insurance covers living expenses for one or two years, one or the other, so check to find out how long your policy covers living expenses and whether that would be long enough to get your house rebuilt. Some policies don’t give you a choice about how long living expenses are paid. Be aware that the amount of money you get is not paid in a lump sum, and the amount is based on the insured worth of your house. Loss of use of the house is usually calculated at 30 to 40 percent of the home’s value, so make sure the house is insured for its current worth.
- Replacing household contents – Insurance companies usually calculate the loss of the home’s contents at 75 percent of the worth of the house (although some policies go as low as 50 percent). In other words, if the house was worth $1 million, they will give you $750,000 to replace the contents. If you determine your contents are worth more than that, you need to upgrade the policy to a higher amount. Be aware that most policies limit coverage on jewelry to $1,000 to $1,500 total, so valuable pieces of jewelry or watches need to be insured separately, as well as high value antiques, art, etc.
- Code upgrades – When a house is being rebuilt after a fire, sometimes city codes require that it be built to a higher standard than the original. Be aware of how new city codes might affect a rebuild and insure accordingly. Most policies automatically allow 10 percent for code upgrades, but policies can be upgraded to 25 or 50 percent. With the 10 percent code upgrade, using the $1 million house example, some policies will pay $900 thousand for the house and $100 thousand for the code upgrades, while other policies will pay $1 million for the house, and an extra $100 thousand for the code upgrades.
- Homeowners renting out a house — Landlords are reimbursed after a fire for loss of rental income. Agents say it’s very important to keep the fire insurance policy updated with what you are currently charging for rent.
- Keep insured value of dwelling current in terms of how much it would cost to rebuild – Agents say homeowners sometimes don’t realize that in Malibu, it now can cost anywhere from $300 to $500 per square foot to rebuild. Insurance should be based on building costs in your immediate neighborhood.
- Tenants – A tenant’s belongings are not covered by the homeowner’s fire insurance policy. A tenant needs to have a tenant’s homeowner’s policy that covers fire and liability.
- Homeowners that do Airbnb — Many homeowners’ policies don’t cover Airbnb use of the property. Such use may require a different kind of policy. Check with an insurance agent.