Editor’s note: Many hard lessons were learned following last November’s devastating Woolsey Fire and, as many residents learned in the months following the blaze, navigating the complex home insurance landscape following the fire can be stressful, not to mention extremely costly.
As Malibu enters peak fire season for 2019, The Malibu Times is revisiting, refreshing and adding to its 2018 Fire Guide, with the 2019 Disaster Guide. Since Woolsey, insurance costs have reportedly gone up around town—we’ve heard reports coverage costs have doubled or even tripled for some homeowners (at the lowest, at our estimate, coverage started at $550 per square foot)—and qualifying for insurance at all is increasingly difficult.
The following is a story originally published for last year’s fire guide and, despite the changes, what we published in 2018 remains good advice. If you missed it last year or need a refresher, here is the Aug. 30, 2018 story, “Malibu Fire Guide: Insurance, Pt. 1.”
The Malibu Times spoke with two top local insurance agents for an overview about precautions to take in making sure a fire doesn’t ruin you financially. Both agreed, as fire agencies do—be proactive.
“Anybody that has home insurance, especially when we’re having these challenging times with fires, needs to get their policies reviewed with their agent to make sure they have the correct amount of coverage,” Rene Williams, a Farmers Insurance Agency owner on Pacific Coast Highway (former Mark Ball agency), stressed. “We’re finding many people have very low coverages on their dwelling. Rebuilding costs are expensive in Malibu. They may not be insured enough to actually get their home properly rebuilt.”
Since rebuilding costs will be higher than they originally were, Bart Baker, owner of B.W. Baker Insurance Services in Point Dume, suggested, “When you’re determining the cost to replace your home, it’s always a good idea to add 10 to 20 percent on top of that.
“The good news is that most insurance policies have what’s called an extended replacement cost endorsement (ERC),” he continued. “That provides an additional percentage above and beyond what’s stated in the policy for what your home is insured for. That additional percentage is typically 25 percent. For example, if your house was insured for $1 million and you had a 25 percent ERC endorsement—worst-case scenario, you actually get $1,250,000.”
Homeowners insured under the California Fair Plan won’t have ERC, as it is a bare bones policy insuring up to $1.5 million written for property uninsurable with standard carriers. It also doesn’t cover theft, water or wind damage.
A home should not be insured for what you paid for it, but what it would cost to rebuild it. “The lowest pricing I usually get from contractors is $400 [per] square foot. If your house is 2,000 square feet—that’s $800,000 potentially of what it might cost to rebuild,” Williams said. Of course, prices could skyrocket if contractors are squeezed with business.
Baker, a former firefighter in Malibu, cautioned that other fees may factor in.
“Don’t forget building ordinance coverage,” Baker said. “That covers the increased cost of construction due to building code changes.”
In Malibu, if an older home is damaged by more than 51 percent, the homeowner will be required to bring his or her home up to current building codes.
[Malibu homeowners who lost their houses in the Woolsey Fire were permitted to construct like-for-like and like-for-like plus 10 percent rebuilds.]
“The only thing in a homeowner’s policy that’s going to pay for that additional cost is building ordinance coverage,” he said. “Otherwise, the duty of the insurance company is just to replace your home exactly how it was when you lost it.” A new septic system alone could run close to $100,000. “So, many folks in Malibu have old septic systems. The older your home the more building ordinance coverage you need.”
“If you have antiques, fine art or jewelry—those are not necessarily covered under your policy,” Williams pointed out. “For example, if you have a diamond ring worth $20,000 and there’s a fire and it’s burned up, the most an insurance company may pay you for it is 1,000-1,500 bucks depending on the policy.” Williams suggested purchasing riders for specialty items in your home “especially if you have a large art collection, because it’s tough to get out the door when a fire is going.”
Both agents emphasized keeping up with your fire insurance payments with no lapse, so you won’t be dropped or incur higher renewals or deductibles. As soon as a fire breaks out, insurance companies put a moratorium immediately on coverage changes.
Loss of use is another aspect to consider, covering some of your living expenses if your home is lost in a fire and you need to rent. It’s important to know how long your policy covers.
“Make sure you’re comfortable with it, because as you know rebuilding a home in Malibu can take a bit of time,” Baker reminded.
Separate or other structure policies will cover gates, fences, pools, guest houses and sheds, other than the home itself. Make sure it is adequate to replace everything.
If you rent out your home, make sure your policy allows for that. Some carriers may take issue with home sharing. Adequate rental insurance for those renting a dwelling is recommended to cover replacement costs for all your personal belongings.
According to Williams, “We want to make sure you’re protected. That’s really what we care about.”