What Will Insurance Cover After a Fire?

California is a hot and dry state, especially near LA. Devastating fires break out frequently, destroying untold billions of dollars worth of real estate and personal property. Fire insurance is a must in many areas. But are you really familiar with what it covers?

Fire insurance coverage under the California Insurance Code

In California, fire insurance is a heavily regulated industry in order to protect homeowners. California law mandates that insurance companies offer certain kinds of coverage. You need to know your rights so that you can enforce them if need be.

California Insurance Code governs standard fire insurance policy. This legislation sets forth the standard form fire insurance policy that all insurers must use unless they offer more favorable terms. It also governs the valuation of losses, replacement cost, and the timing and conditions under which insurers must pay. Here is what you have the right to expect.

Rebuilding your home

If your policy includes replacement cost coverage, California law ensures that you’re entitled to the full amount it costs to rebuild your home at today’s construction prices—even if you rebuild at a different location. This includes new walls, roofing, windows, and attached garages. It is important to remember that you are entitled to full replacement cost—what it costs to rebuild today, not what your home was worth at the time of the fire.

Personal belongings

Your policy will typically cover personal property such as furniture, clothing, and electronics. It might cap compensation for items of special value, such as jewelry or artwork. As long as you act before a fire, however, you can obtain special coverage for these items at an extra charge.

Following wildfires, many insurers operating in California have agreed to advance 25–30% of personal property coverage without requiring a full inventory—though this is not guaranteed and depends on your specific policy.

Temporary housing and living expenses

If your home becomes uninhabitable after a fire, your fire insurance will pay for temporary accommodations (a hotel, a rental home, etc.). Your insurance also covers increased costs of living such as food (if you live in a hotel with no kitchen, for example), laundry, fuel, etc.

Under California law, your insurance company must offer you these benefits for up to 36 months, according to need, if your home was damaged or destroyed in a wildfire. Many insurers may offer an upfront ALE payment covering up to four months of expenses to help you secure housing quickly, though this depends on your insurer and policy.

Cleaning up

After a fire your property will be covered in ash, toxic residue, or burned materials. Standard fire insurance will typically pay for the removal of debris and hazardous materials, to the extent necessary to render the site safe for rebuilding. This might take the form of a portion of your coverage set aside just for cleanup. Ask your insurer how this works in your particular policy. Get an answer in writing.

Coverage for the expense of meeting California building codes

California’s building codes are among the strictest in the nation, especially in high-risk wildfire zones. Under California law, your policy must include funds for:

• Bringing your home up to standards mandated by current safety codes.
• Adding smoke detectors, fire-resistant materials and other safety precautions.

That means if the city strengthens building codes in response to the fire that damaged or destroyed your home, your insurance will cover the costs of compliance.

If you can’t get standard insurance: The California FAIR plan

If you live in a high-risk wildfire zone, you might find that no private insurance company will cover you. All is not necessarily lost, however. You might still qualify for the California FAIR Plan, a last-resort fire insurance program supported by the state government. FAIR coverage is more limited and often more expensive than regular insurance. One strategy that might work is to use FAIR together with another policy that fills in the gaps.

Understanding deductibles, policy limits and exclusions

Don’t overlook important policy terms such as deductibles, policy limits, and exclusions. Ignoring these could result in a nasty surprise when you can least afford it.

Deductibles

A deductible is the amount you pay out of your pocket before insurance kicks in. In California, some fire insurance policies use a percentage deductible. A two percent deductible, for example, could mean $10,000 on a $500,000 home.

Policy limits

Policy limits represent the maximum amount your insurer will pay no matter what the size of your claim. Make sure your fire insurance coverage equals or exceeds the amount you will need to rebuild your home in your neighborhood—not just your home’s “fair market value.”

Exclusions

Exclusions are circumstances in which your policy will not provide coverage. Typical exclusions include arson by the homeowner, and earthquake or flood damage (which need separate coverage).

What to do next

Take the following actions after a California fire damages your home.

1. Report the fire: Call your insurer as soon as you’re safe from harm.
2. Get a full copy of your policy if you don’t already have one: California law requires insurers to send it to you within 30 days if you ask in writing.
3. Take photos (and videos if possible) of all damage to your home.
4. Request an advance from the insurance company: You are going to need some money for living expenses and replacement of your critical belongings.
5. Keep all of your receipts for every penny you spend due to the fire. This should include indirect expenses such as child care, if they arise from the fire.
6. Keep a written record of insurance adjuster visits, communications, and paperwork.

Take any other actions that prudence and foresight demand.

Final tips for California fire insurance

Make sure to observe the following tips before a fire threatens your home:

• Update your coverage every year, because California building costs are high and rising rapidly.
• Ask for replacement cost coverage, if you haven’t already. This will get you the full amount of money you will need to rebuild.
• Keep an updated inventory of valuable items in your home. This will speed up the claims process in the event of a fire.
• Review your Additional Living Expenses (ALE) rights. You’re entitled to up to three years of help, as mentioned above.

If a fire does break out and damage or destroy your home, get a second opinion, or even a third opinion, from a public adjuster, an attorney, or both.

Need help with a California fire insurance claim?

Los Angeles real estate property damage law firm McNicholas & McNicholas has helped thousands of clients win justice from evasive defendants and stingy insurance companies—to the tune of over $2 billion. Fire insurance claims are some of the biggest claims we handle.

Insurance companies fear us—and quite frankly, we don’t blame them. Act decisively to schedule a free initial consultation with us. And remember—if we don’t win your claim, we work for free.