Will insurance claims on homes destroyed in the West Coast fires be paid?

Insurance policies are written leaning towards the insurer’s benefit. Otherwise there would be no insurance companies.

Fires are not new in California. I imagine it is like floods in places along the Mississipi.

I’m guessing that if the home owner has fire coverage they will get paid similar to hurricanes in Florida. Hurricanes in Florida involve two different things: windstorm coverage and flood insurance. There are always stories of people having trouble getting paid, but I know a lot of people who have dealt with hurricane damage, including myself, and they all were paid by their insurance.

From what I understand FEMA is helping with the California fires.

I assume in your part of the country fire coverage has a very high deductible. Usually, fire is covered in a standard policy, but maybe where you live there is a separate rider?

When I lived in the Memphis area some of the insurance companies dropped offering earthquake insurance. My insurance continued to offer it, but it was very expensive. If California insurers have been dropping fire coverage there might be people who don’t realize they aren’t insured for fire.

Maybe there is a possibility small insurance companies go completely out of businesses. I don’t know what happens then, except maybe FEMA gives a nominal amount like they do for the uninsured.

Hopefully, another jelly has more concrete information.

Any building that is mortgaged has to gave a fire insurance policy; that is a requirement for the loan. So most homes in California have fire coverage.

What happens though is that most policies are priced based on old construction costs and old construction building codes, not current reconstruction costs or codes. So if a permit to rebuild is issued, a new home can’t be built with a shake roof like the old one, or needs special plumbing for gas lines. Earthquake requirements must be current, not what was enforce when the home was built 20,30 or 50 years ago.

The homeowner ends up with the insurance company paying the claim but at an amount 40% -50% of what it costs to rebuild.

The insurance companies also reinsure themselves through Lloyds of London or other reinsurers. They are expert at managing risk.

@zenvelo Great point about the rebuild. My insurance policy I pay extra for replacement cost on furniture and I think appliances, and for the structure I have some sort of coverage that if the building increases up to a certain percentage more to rebuild it’s covered (I think it’s 25%, but I’m not sure). Probably, a lot of people don’t pay extra for those things.

Do you happen to know if the homeowner gets the check directly, or if the payment has to go directly to the contractor to rebuild? I’ve heard of it both ways. For people who have lived there a long time the land might be worth a lot once things start to rebuild, assuming the area gets rebuilt. People could take the insurance money and move to a less expensive part of the country. Then sell the land in five years when it’s worth more again if the land value had plummeted. Use the land money for retirement.

I guess it depends on what coverage they have. If the homeowner’s coverage covers fire, then yes, they will pay off. If Fire or Forest Fire is a separate rider they need and they don’t have it then no, they won’t. During Hurricane Florence I know many people that didn’t have flood insurance. Their homes weren’t in designated flood plains and hadn’t flooded in remembered history. Yet when they flooded, they couldn’t collect a dime from their homeowners insurance.

People who have coverage will be paid but insurance rates will go much higher in the future if the State Insurance Commissioners allow it. Some areas may only be able to get insurance with restrictions and some companies may pull out of the state. More homeowners may have to get basic coverage through the state run FAIR plan

@JLeslie i do know that before an insurance company will pay for replacement furniture—or to repair the stuff you have— you’d better have photos, and appraiser’s estimates and/or sales receipts, and even if you have the sales receipt of an item, unless you had just purchased it, they’ll give you the cost of it as if you were buying used. It’s kind of a legal form of lowballing you.

@snowberry We always update photos of our furniture and house when hurricanes are coming for insurance purposes. Good reminder for @Jeruba to take photos and get them online (with privacy features) not just in her phone.

Of course they will. If not, the insurance companies will be guilty of fraud.

@JLeslie and @snowberry: I lived in a building that burned in a fire, about 22 years ago. The people who had insurance (renters’ insurance) had the insurance company come in and give them a check for the total amount of the policy, no questions asked, no receipts had to be shown.

When I first moved to my new place after that, I was keeping all receipts for purchases that were anything more than about $100. Anything like a microwave to cookware to furniture to clothing to jewelry, I kept the receipt. Then I stopped, because it just got to be too much. Too many receipts, and some things you get rid of and then it would have to be some type of efficient filing system to get rid of the receipt when you dispose of the item.

When the insurance companies have big quantities of claims, like in a building, or in this case the massive fires, it would be too much for people to hand over piles of receipts and in a lot of cases, the receipts are probably burned up with the house.

@jca2 I agree. I would have to check to be sure with an agent but I think you would get the amount of household contents you are insured for generally without having to prove. Of course, if you have valuables like jewellery or art work they should be appraised and scheduled.

@janbb: Yeah from what I know, a total loss is a total loss. There are not enough hours in the day for an insurance worker to tally up your old receipts and figure things out.

In the case of the building I lived in, my neighbor had a 30k policy and she got 30k, which became the down payment on a new house for her. I didn’t have renters’ insurance because I always felt like if there’s a problem like a leak, the landlord has to fix it. I wasn’t thinking of something catastrophic like a total loss. Fortunately, the Red Cross was very helpful and I had just changed jobs, so there was a collection taken at my old job and a collection taken at my new job, so that was all helpful to me.

@jca2 Yes, when I had damage to my house from a hurricane I received what it cost to fix the damage minus my deductible. It was my screen around my pool and some stucco on my house. The screen had cost me $11k to build 3 years before, and now was $30k. My deductible was $8k, and I did get the check for $22k. I’m rounding everything. The screen was built poorly, I seriously thought about going after the builder for my deductible, but I didn’t. The poor construction is not really applicable to the OP’s situation anyway.

I don’t keep receipts from 20 years ago and plenty of my furniture is over 20 years old. I have replacement value insurance.

When I’ve lost food from power outage from hurricanes I’ve always been honest, but I easily could have doubled the amount and the insurance would have sent me the check. They just go by what you tell them for fridge contents within reason, there is probably a limit, but I don’t know the amount. They don’t ask for receipts for that.

I have a roof problem, almost everyone on my block does, and I had to get three quotes from roofers to turn in to the manufacturer. I don’t know if it’s actually the manufacturer or the insurance company of the manufacturer that covers the problem.

Companies tried to dropped clients after last years fire season. State put a one year moratorium on it, but the clock is ticking. Homes will become unsellable if they are uninsurable in high-risk areas. Communities will die a slow death.