Are You Underinsured on Fire Damage Coverage? We Can Help.

You can never tell how close the wildfires will get to the suburbs.

We hope that your home is never destroyed by a fire, but it can happen. Especially with Southern California’s Santa Ana winds, which can whip up a simple fire and make it widespread and deadly.

Some people have found out that this isn’t the worst part of losing your home. The worst part comes when you submit the insurance claim, only to find out that you’re underinsured.

According to a 2008 survey from industry watchdog United Policyholders, over 75 percent of claimants from San Bernardino and San Diego counties experienced this devastating scenario. The same survey found that these victims of wildfire were underinsured by an average of $240,000.

Even in California’s high-priced real estate market, that’s a huge chunk of change when it comes to a home price! And why the discrepancy? Mainly because many Californians don’t realize that there’s different types of home insurance available, and some are more restrictive than others. There’s a big difference between insuring your home for cash value versus replacement cost, and there’s three types of replacement-cost coverage:

  • Guaranteed replacement-cost coverage: Guaranteed replacement-cost coverage offers the broadest protection. Under guaranteed replacement-cost coverage, the full cost to repair or replace a residence is payable for eligible risks described in your home insurance policy.
  • Extended replacement-cost coverage: Like guaranteed coverage, extended replacement-cost coverage pays repair or replacement costs beyond basic policy limits. Extended replacement-cost coverage is capped by additional dollar or percentage amounts.
  • Basic replacement-cost coverage: Basic replacement-cost coverage has a single set of limits for home repairs or replacement, often much lower than the upper range in extended or guaranteed replacement-cost policies.

Although usually less expensive, actual cash-value coverage can leave homeowners woefully underinsured, as it deducts your home’s physical depreciation from eligible repair costs. If your home is fully destroyed, actual cash-value claims are limited to the fair market value of the home at the time of loss. Although the real estate market here seems to be recovering, it’s not a smart gamble to take, especially if you are in an area where wildfire damage is a real and present danger.

Many parts of Orange County are vulnerable to wildfires, especially along the foothills, including Rancho Santa Margarita, Tustin Ranch, Orange Hills and Foothill Ranch. In fact, the insurance company will check the location of your home to see if you are in a fire hazard area before issuing a policy.

Does this all seem very complicated? It can be. But at BMR Insurance Agency, all of our agents are fully trained to read all of the fine print, and make sure you’re properly covered on your budget. Does talking to a real person about this seem like a nice change of pace? Then call BMR Insurance Agency for a free 30-Minute Insurance Makeover. What do you have to lose? If we can’t save you money or improve your coverage, we won’t have you change a thing. Call now: (714) 838-1911.

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