Does homeowners insurance cover wildfires?

Homeowners insurance is financial protection for your home and personal property against certain hazards, or perils, covered by your policy. That means you’re insured against everything from destructive weather to theft to elemental perils like fire.

Most causes of house fires are covered, including fires caused by your cooking appliances, faulty wiring, arson, and sometimes natural burning wildfires. However, finding adequate coverage for your home against wildfires is no longer a given, especially if you live in certain brushfire regions in California. The uptick in costly and devastating wildfire damage has culminated in record losses for insurance companies, so they’re now taking steps to reduce their liability.

That could mean your insurer doesn’t renew your policy, writes a wildfire exclusion into your policy, requires a separate wildfire deductible (similar to windstorm and hurricane deductibles), or it could mean they simply stop writing policies in areas with high fire risk. But worry not, if you can’t find adequate coverage, there are options available for you.

Read on:

• What parts of your policy cover wildfires?
• Why wildfires are hard to insure against
• How to get wildfire coverage
• Reporting a wildfire claim
• How to prevent wildfire losses

What parts of your policy cover wildfires?

If you live in a wildfire-prone area and you’re able to get adequate homeowners insurance, there are generally four parts of your policy that may reimburse you for losses to your home or personal property. Your insurer may also pay you back for living expenses if you’re forced to evacuate your home and live somewhere else temporarily.

It's not all about just having the right coverage, but having enough coverage. If you live in a high-fire-risk area, the risk is significantly greater that you’ll lose your entire home and personal belongings than if you didn’t live near the wilderness. Be sure that your coverage limits account for the full rebuild cost of your home and replacement cost of your personal belongings.

Dwelling coverage

If a wildfire burns down a portion or all of your home, your dwelling coverage may reimburse you for repair or rebuild costs. Your dwelling coverage limit should equal the amount it would cost to rebuild your home and any attached structures at current construction and labor costs.

One caveat to keep in mind here is that your standard replacement cost dwelling coverage limit may not suffice if your charred home was part of a large-scale burn that wiped out other homes in your region as well. That’s because natural disasters tend to increase construction and labor demand in affected areas, and costs go up as demand goes up.

Your replacement cost coverage doesn’t account for unexpected spikes in rebuild prices, but there are certain endorsements you can add to your policy which do. One such endorsement — extended replacement cost coverage — extends your coverage an additional 25% or 50% of your dwelling limit, and the other — guaranteed replacement cost coverage — covers reconstruction costs regardless of how much prices increased. If you live in a fire-prone landscape, you should consider upgrading your dwelling coverage.

Other structures coverage

Other structures refers to the portion of your policy that covers detached garages, gardening sheds, or fences on your property against covered perils. Your dwelling coverage limit is typically 10% of your home’s dwelling coverage, but your insurer may allow you to increase your other structures limit for an additional premium.

Personal property coverage

If that same wildfire burns all of the stuff inside your home, like your furniture, clothes, and jewelry (up to a certain limit) you may be reimbursed up to the personal property limit in your policy. Your personal property coverage is usually 50% of your dwelling coverage, but if you have a lot of expensive stuff, some insurers will allow you to increase your limits to 75% of your dwelling coverage.

Similar to your dwelling coverage, you should make sure personal property claims are reimbursed with replacement cost value payments.

To make sure you’re getting a homeowners insurance policy with the right about of dwelling coverage, a licensed representative at Policygenius can help you navigate the many options available.

Loss-of-use coverage

If you’re forced to flee your home in the wake of a wildfire and stay somewhere else temporarily while your home is being gutted and rebuilt, your policy’s loss-of-use coverage may reimburse you for any additional expenses you incurred while on the road.

Your loss-of-use coverage may reimburse you for fuel expenses as well as food, hotel, and lodging expenses. Be sure to hold onto your receipts to present to your insurer when you file a loss-of-use claim.

Why wildfires are hard to insure against

After the unprecedented and record-setting wildfire losses in recent years, homeowners insurance companies have reevaluated the amount of risk they’re willing to take on. This has manifested itself in a few different ways:

• Most standard carriers (Safeco, Metlife, Travelers, and Stillwater) may simply refuse to insure property in brushfire areas
• Some speciality carriers (like Lloyd’s of London) may cover homes in brushfire areas, but may exclude wildfires as a covered loss
• If your home was impacted by wildfire or you live close to an area that was impacted, your insurer may not renew your policy

The reason for this reevaluation is simple: fires are getting larger and more intense, more people are living in high fire risk areas than ever before, and that means more losses. In fact, according to the Insurance Information Institute, insurers paid out more than $12 billion in insured losses in 2017 alone, more than six times the insured losses from 2016, and 2018 is on pace to surpass 2017 by a healthy margin.

Given the current pattern of shortened wet seasons and lengthy dry seasons on the West Coast, the compounding effects of climate change, and overpopulation in wilderness areas, this trend isn’t expected to stop any time soon.

To lessen their liability and transfer more costs onto the policyholder, some insurers are simply pulling out of certain areas or not insuring wildfire losses, and if you do find adequate coverage, some insurers may require that you pay a separate wildfire deductible.

How to get wildfire coverage

It’s becoming increasingly common for California insurers to send out nonrenewal notices to insured homes in wildfire-prone regions. If you receive a nonrenewal notice, or you moved and are having a difficult time finding adequate coverage, you have a few options:

Pay for a premier carrier

If you live in a high-risk area and you were recently dropped by a standard insurer, you may be able to find coverage through a more expensive “premier” carrier like Chubb or AIG.

Chubb and AIG both offer loss-prevention and private firefighter services, so they’re built to deal with the effects of wildfires. Keep in mind that premier carriers are generally only intended for homes with a valuation greater than $1 million, and in most cases they won’t insure homes that are valued below a certain amount.

Pay for a surplus line

If you can’t find coverage because your home is at too much risk, you may be able to buy insurance through “surplus lines.” Surplus lines are specialized policies that protect your home against risks that regular insurance companies won’t take on.

Surplus lines aren’t required to abide by the same state regulations as standard carriers, and are also generally more expensive than your typical home insurance policy.

Buy your state’s FAIR plan

Most states offer last-resort insurance if you can’t find anything on the open market, called Fair Access to Insurance Requirements, or FAIR Plans. In California, for example, FAIR Plans cover up to $1.5 million in structural and personal property coverage for homes in high-risk areas. FAIR Plans are typically twice as expensive as plans on the open market, and don’t offer liability protection. While most states have something similar to California’s FAIR Plan, they may call it something different, so be sure to check your state’s Department of Insurance or its equivalent for more information.

Reporting a wildfire claim

If your home has been damaged or destroyed by a wildfire, you’ll want to contact your insurance agent as soon as possible, or simply go to your carrier’s website and begin your claim.

Be sure to give your claims representative as much information as possible during your claim submission. Your insurer will then have you fill out a proof-of-loss form detailing whatever property was damaged or destroyed. Be sure to give a specific and accurate description of each item.

To validate your losses, your insurer may send an insurance adjuster to your home, so be sure to keep everything in its place and don’t throw anything away. If there was something you missed in your proof-of-loss form, you may be able to use this opportunity to have the adjuster survey the unreported losses.

How to prevent wildfire losses

The Insurance Institute for Business and Home Safety (IBHS) has concluded that homes built within 15 feet of each other are more likely to burn in bunches. But even if your home is located in close proximity to another home, there are still some measures you can take to prevent a total loss:

• Make sure your home has a six-inch ground-to-siding clearance, and consider noncombustible siding and roofing for your home
• Clear debris from your roof
• Cover your home with Class A roofing, like concrete or clay roof tiles
• Clean your gutters regularly
• Use nonflammable fencing and gates
• Protect your windows using multi-pane or tempered glass windows and make sure all windows are closed if a wildfire is in close range
• Use deck boards that comply with California building regulations for wildfire-prone areas and remove anything flammable from underneath your deck
• Remove any brush or shrubs from underneath trees on your property, prune branches that extend over your home, and remove any dead vegetation near your home