Personal Finance

Take these next steps if your home has been destroyed by wildfire

Key Points
  • A trio of wildfires are burning through northern and southern California, leveling the town of Paradise.
  • As homeowners prepare to start the claims process with their insurers, they should ensure that they hold onto their receipts for immediate repairs and living expenses.
  • Be mindful of deductibles and limitations on replacement cost payments. You could face higher expenses.
Firefighters try to save a building as the Camp Fire moves through the area on November 8, 2018 in Paradise, California. 
Justin Sullivan | Getty Images

Residents affected by the three fires scorching parts of California have yet another ordeal to contend with: beginning the homeowners' insurance claims process.

Two of the blazes — the Hill Fire and the Woolsey Fire — ignited in southern California on Thursday, setting off evacuations, according to the Ventura County Fire Department.

Meanwhile, the Camp Fire moved through northern California on Thursday, forcing thousands of residents to flee and engulfing the city of Paradise.

All three of the fires continued to burn through on Friday.

The one bright spot for homeowners is this: As long as you've been paying your premiums, the standard homeowner's insurance policy covers fire damage to your home, structures on your property and most of your belongings.

Certain specialty items, such as art or jewelry, might need a rider in order to be covered.

Here's what you should look out for if you're preparing to file an insurance claim after you've lost everything.

Document everything

The best preparation in advance of a disaster is to keep a "go bag" of important materials — including your insurance policies — that you can readily grab before fleeing, said Janet Ruiz, a spokeswoman for the Insurance Information Institute.

Maintain images of your belongings and your home, and keep these in cloud storage.

This is a way to provide your insurer with proof of the items you own and the condition they were in prior to the disaster.

In order to get your claim processed as quickly as possible after a disaster, be sure to report it to your insurer immediately and take note of your claim number, said J. Robert Hunter, director of insurance at the Consumer Federation of America.

Know your coverage

A plume of smoke rises above the Camp Fire as it moves through the area on November 8, 2018 in Paradise, California. 
Justin Sullivan | Getty Images

Understand the extent to which you have additional living expenses coverage as part of your homeowners or renters insurance policy.

This coverage foots the bill for hotel stays and meals in the event that your dwelling is uninhabitable. Insurers have coverage limits when it comes to paying for these costs, capping the amount that they'll pay for or the applicable length of time, according to the Insurance Information Institute.

You may be entitled to money up-front for these costs, too, so be sure to keep your receipts, said Hunter.

Work on repairs

Your insurer will send a claims adjuster to assess the damage and it may recommend a contractor to provide you with estimates.

If you have a trusted local contractor, consider obtaining a repair estimate so that you have a guideline to follow when you're talking to your claims adjuster, said Hunter.

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Be aware that you're not required to use your insurance company's contractor, but you should obtain an explanation if there's a difference in estimates.

It could come in handy if you have to negotiate with your insurer.

"If the insurance company's contractor says that the damage estimate is $50,000 and your contractor it's $55,000, you may ask that contractor to explain why," Hunter said.

Watch out for fly-by-night contractors. Make sure that the company handling your repairs is insured and has good references, Hunter said.

Watch out for catches

An used car dealership is seen engulfed in flames during the Camp Fire in Paradise, California, November 8, 2018.
Stephen Lam | Reuters

Be aware that there could be limitations on your policy, too.

"If your whole house burned down, it used to be that you had guaranteed replacement," Hunter said. "Insurers started to rethink this and apply an absolute limit on what they will pay."

For instance, a homeowners policy that covers the "replacement cost" of your home will pay out the cost of replacing your damaged home with a similar dwelling in the current market.

However, some companies may cap that replacement cost at 20 percent over the face value of the policy: If your replacement value is $1 million, then the most your insurer will cover is $1.2 million.

This can be a problem amid a disaster, when labor and building materials are in high demand.

"If you have a lot of damage in a large area and hundreds of homes damaged, you may have a surge in prices," said Hunter.

He also warned that insurers may not cover the extra cost of bringing your damaged home up to new building codes, including upgrading your wiring or elevating the dwelling to curb flood risk.

If you disagree with the resolution of your claim, take your complaint to your insurer's consumer relations department.

You can also escalate your complaint to your state insurance department or see a lawyer, said Hunter.

Keep detailed notes of your interactions with the insurance company, as you may need them in the event of a dispute, he said.