Rebuilding After the Wildfires: A Step-by-Step Guide to Navigating Your Home Insurance and Recovery

Phase 1: Action Plan and Insurance Policy Review

Experiencing a loss of a home due to wildfires is devastating and navigating the process can be difficult and time-consuming. It's important to take specific actions after a loss to ensure you understand your options and the home insurance policy you have in place. If you were affected by the wildfires, we have provided an action plan and guide to help you understand your home insurance policy.

BakerAvenue will publish a series of articles to guide those who have been impacted by the fires. Even if you haven’t been affected by the recent events, it's still important to ensure you have adequate insurance coverage and an action plan in place for emergencies. Please reach out to your advisor if you have questions or need to review your home insurance policy in detail.

Action Plan

After a devastating event, it's common to feel a sense of shock and helplessness, so it's important to have an action plan ready to implement if this type of event happens to you. It’s crucial not to make quick decisions during this process and to stay highly sensitive to potential scams, speculators, and contractors who may offer services after the event.

Step 1: Find short-term temporary housing (hotel, Airbnb/VRBO, friends, or family) to get through one to two weeks and start the insurance claim process. It's important to keep and track all expenses related to housing, food, clothing, and electronics.

Step 2: Obtain and understand your insurance policy and review it with an expert. In the short term, there are two parts of the insurance policy to consider immediately:

1. Loss of Use Coverage (also known as ALE - Additional Living Expenses): This helps cover living expenses when your home becomes temporarily uninhabitable and allows you to maintain your standard of living while repairs are made. These expenses typically cover costs like temporary housing, meals, storage, and transportation.
2. Part C (Personal Property): This covers the cost of your personal items in your home if they are destroyed, damaged, or stolen.

See the "Reviewing Your Insurance Policy" section below for more information.

Step 3: When it's safe to do so and evacuation orders are lifted, return to your home to document damage and assess the current state of your property in order to start the claims process.

• Do not attempt to retrieve personal belongings without proper supervision from local fire departments or officials.

Step 4: Contact your insurance company to file a claim. Each insurance company has a different process to file a claim, so it's important to contact them to ensure you follow their specific procedure. Your insurance company may require proof of property damage to start the claims process.

Step 5: Immediately begin logging any displacement expenses (hotel costs, food, clothing, etc.) and begin listing personal property items lost in the fire. These steps are critical to implement right away, as the insurance company may require additional information to process specific parts of your coverage:

1. Displacement Expenses: Any costs incurred while displaced from your home, including meals, lodging, clothing, and other items.
   • Include the date, merchant, amount, description, and a copy of the receipt.
2. Personal Property Log: Any personal property included within your home that was lost in the fire, including furniture, jewelry, electronics, appliances, etc.
   • Include the item, description, original value, and potential replacement costs.
   • Recommendation: Look at family photos inside the home to help identify lost items. Sometimes dividing up the list by room can make it more manageable.

Step 6: Long-Term Housing: Most insurance companies outsource a third-party company to provide long-term housing that is similar in size to your home. You are typically not required to use this third party, so it is recommended that you conduct your own research to find other housing options that could be less expensive, ensuring your Loss of Use coverage can last throughout the rebuilding process.

• Given the extent of the damages by the wildfires, plan to be out of your home for 2–3 years and budget your Loss of Use policy limit to cover your housing costs during this time.

Reviewing Your Insurance Policy

It's important to obtain the insurance policy documents and declaration pages prior to filing your insurance claim. The declaration pages will include your policy limits, exclusions, and endorsement information.

1. Part A (Dwelling): This covers the cost to rebuild or repair the physical structure of your home. It's essential to ensure your policy reflects the current replacement cost, considering factors like recent renovations or increases in construction costs. Underinsurance can lead to significant financial burdens.
   • Actual Cash Value vs. Replacement Value: Actual cash value coverage determines the value by reducing the cost to replace your home due to depreciation. This type of policy may have lower costs, but the depreciation should be considered. Replacement cost coverage helps repair or replace damaged property without deducting for depreciation, based on the actual cost to rebuild your property.
2. Part B (Other Structures): Covers detached structures on your property that are not physically connected to your mail dwelling, such as detached garage, pool, shed, fence, or gazebo.
3. Part C (Personal Property): Covers the cost of your personal items in your home if they are destroyed, damaged, or stolen.
4. Other Coverages:
   • Loss of Use (also known as ALE - Additional Living Expenses): This helps cover living expenses when your home becomes temporarily uninhabitable and allows you to maintain your standard of living while repairs are made. These expenses typically cover costs like temporary housing, meals, storage, and transportation.