The San Francisco Bay Area had generally enjoyed relatively reasonable home insurance rates. As a result of recent local wildfires and other large scale natural disasters in other parts of the country however, insurance carrier returns have been impacted - resulting in far more stringent underwriting of homes in brush prone areas and significant premium increases.
Prior to the Oakland Hills firestorm of 1991 many homeowner’s insurance policies included Guaranteed Replacement Cost coverage. This ensured that homeowners received the full value of reconstruction regardless of stated dwelling policy limits. For example, if a homeowner had a residence insured for $1 million, but the reconstruction ended up being $2 million, the policy would have covered the entire cost, less the deductible.
Fast forward to 2018 and you will find that most home insurance provides have done away with Guaranteed Replacement Cost, and have replaced this endorsement with a dwelling coverage extension cap – which can range from 120% to 200%. For example, if a home that is insured for a stated replacement cost of $1M, the maximum the insurance company would pay with a 120% coverage extension would be $1.2M. Such coverage extensions are offered by many Direct Writers. By comparison, if you were insured with an affluent market carrier, using the same $1M example, coverage would cap out at $2M by offering a 200% coverage extension. It no doubt pays to shop around!
Loss of use is also a serious concern for homeowners who lose a primary or income producing residence. Many policies limit loss of use to 12 months (check your policy wording as ‘Actual Loss Sustained’ may only be for 12 months). In the 2017 Santa Rosa/Napa fires many homes could not be completely rebuilt within a 1-year timeframe due to contractor demand etc. leaving the homeowner in a poor financial position. Building Ordinance coverage is another aspect that can be critical to have in a homeowner’s policy. As ordinances and regulations change, cities will require that your home be rebuilt to current code. For example, if your home was built in 1930 it most likely didn’t have a fire suppression sprinkler system. Many counties now have a requirement that if your home is over a certain square footage limit that a sprinkler system must be installed. This ‘extra’ would be covered under your ‘Building Ordinance or Law’ endorsement. Check your policy as coverage varies wildly from one insurance provider to the next – anything from a 10% ordinance sublimit to higher end policies that offer ordinance all the way up to stated policy limits.
Here are a few tips for ensuring that you have adequate coverage in the event of an unexpected catastrophic loss:
- Take the time to carefully review your home insurance policy with your agent or broker representative to better understand the terms and limits being offered.
- Shop around, see what other providers have to offer. You will find large fluctuations in coverage and rates.
- Inquire about discounts. Combing your home/auto/umbrella as a package could save you up to 25%
- Document the contents of your home - take a video of each room, closet, and drawer. Upload this information to a cloud server like Dropbox, or Google Drive so that if your home is destroyed, you can easily access your list of contents. If you have any irreplaceable items like photos, documents, receipts or appraisals, scan and store them in the cloud.
Here is a link to 6 free Home Inventory Apps:
Also check out this Asset Tracking home inventory software called Panda: