What You Need to Know About Wildfires and Insurance Coverage

May 20, 2021


What You Need to Know About Wildfires and Insurance Coverage

According to a recent article published in the New York Times, wildfires in the U.S. have grown larger and more destructive over the years.  For instance, in 2020 alone there were over 58,000 fires, more than 40% of which occurred in California per the National Interagency Fire Center (NIFC). Apart from killing at least 30 people in California, the fires also burnt down 4.2 million acres of land, destroying property worth billions of dollars, according to the Insurance Information Institute (III). This shows just how big of a threat fire is to your property and why you need to purchase the right insurance to protect your home. Read on to learn more about wildfires and insurance coverage.

Does Homeowners Insurance Policy Cover Wildfires?

Due to the prevalent wildfires in the U.S., insurance companies are now generally unwilling to insure homeowners, considering the risk at hand. For instance, in 2019 alone, insurance providers dropped at least 235,200 home insurance coverages in California, according to the Insurance Journal.  While it is normal for insurance companies to withdraw their coverage when the risk is too high, the standard homeowners insurance policy covers damage from wildfires. More specifically, the wildfire coverage, which is the typical homeowners insurance policy, will provide the following coverage in the event of a fire:

  • Rebuilding cost – This part of your home insurance policy covers damage to your home's physical structures, including the garage. In case your home burns down, this policy will pay for the cost to rebuild it from scratch. Take note that the amount of coverage will depend on the total cost of rebuilding your home.
  • Personal property – Homeowners insurance coverage pays for fire damage in your home, including the property inside. This may include items such as electronics, furniture, kitchen appliances, and clothes. Even so, it may not cover valuable items such as collectibles, currency, and expensive jewelry.
  • Additional living expenses – In case a wildfire destroys your home, you may need to stay away for some time as you wait for the insurance company to rebuild it. This means that you will have to incur expenses such as paying for a hotel room, laundry services, and restaurant bills. Thankfully, your home insurance policy may also cover these expenses.
  • Plants – Most home insurance policies cover plants, including trees and shrubs, against named perils.

Other insurance policies such as renters insurance and condo insurance may also cover damages resulting from wildfires. Additionally, your auto insurance policy may cover the damages to your car in case it also burns down in a wildfire. Take note that if you live in an area prone to wildfires, the insurance company may charge you high premiums on your home insurance policy. Also, the amount of coverage you receive from the insurer depends on the limits you have as well as the exclusions in your policy.

Claim Settlement Options

The amount of coverage you receive in the event of fire damage also depends on the type of policy you have with the insurance company. The coverage mainly comes in two options:

  • Actual cash value – This covers the market value of your home at the time of the damage.
  • Guaranteed replacement cost – It pays for the actual value of the home before depreciation.

These are some of the important facts to know about wildfires and your home insurance coverage. Contact the experts at John E. Peakes Insurance Agency for the assistance you need today in purchasing the right home insurance coverage. Our dedicated team is happy to address all your coverage needs in Lancaster, California.