Lessons Learned from the LA Fires
Filigree would like to send our thoughts and prayers to all of those impacted by the horrific wildfires in Southern California. Unfortunately, we have some dear friends and clients that tragically lost everything. Therefore, it seems prudent to share a few lessons learned from this tragedy.
Filigree has clients in many states, including states prone to wildfires such as Washington, Oregon, California, Idaho, Utah and Colorado. To help us with this article, Filigree sat down with a longtime friend and insurance expert Jessica Sailor of Brown and Brown Insurance Services. What follows are some key areas of focus on this topic.
REVIEW YOUR INSURACE: Reacquaint yourself with your current home insurance policy. Many people impacted by the fires have owned their homes for many years, paying little attention to coverage details and more to the amount of the premium. It’s important to review your policy and what is covered. For review, most home insurance policies have 5 parts.
Dwelling – Attached structures; what would it cost to rebuild the same house.
Other Structures – Detached garages, sheds, outdoor structures, pool etc.
Personal Property – Furniture, art, kitchenware, clothing etc.
Loss of Use – When you cannot access your house (temporary rental, etc.)
Personal Liability – Very important, but not as much for this topic.
The dwelling amount is critical and sets the base for “other structures” and “personal property” coverage, which are usually a percentage of the dwelling coverage amount. After your policy has been set, it should adjust for inflation over the years. However, keep in mind that property values do not always move in step with inflation. Some polices provide for a “buffer” amount for dwelling replacement. This “buffer” is usually referred to as Extended Replacement Cost coverage and is the difference between the actual coverage amount and its true replacement cost. Example: $1,000,000 in dwelling coverage with 10% buffer amount. This means, if it costs $1,200,000 to replace your home, you receive $1,000,000 (dwelling coverage) + $100,000 (your 10% buffer amount). It would be up to you to cover the additional $100,000.
CARRIERS MATTER: Carriers, their policies, coverages and expertise vary greatly. It is important to that note some high-net-worth carriers offer full replacement value with Full Replacement / No Cap coverage. Another interesting fact: some carriers require you to rebuild – even if you want to move out of the area. Others offer a cash-out option: if you decide to walk away and move, the insurance company will write a check for the dwelling amount. It would then be up to you to sell your lot.
KNOW YOUR TRUE REPLACEMENT COSTS: The recent fires highlight the importance of making sure your dwelling coverage is sufficient for its true replacement cost. If applicable, this includes "other structures" coverage to adequately protect things like pools, outdoor kitchens, detached garages and other external structures. If you feel your true replacement costs are higher than your coverage, contact your insurance carrier for a review. Increasing your coverage will most likely increase your premium payment, so consider your options carefully. If you have a mortgage, remember your monthly payments continue even if your home was destroyed. This will be in addition to any temporary housing costs, which should in part be covered by your “Loss of Use” coverage. In the case of the Palisades fire, it is expected that rebuilding could take years, not months to rebuild. Therefore, it’s important you understand the “Loss of Use’ section of your policy.
INVENTORY YOUR BELONGINGS: You should be prepared to provide a detailed list of all the property lost and their respective values. Many insurance professionals, including Jessica, have created inventory templates to help clients organize their belongings and document their possessions for insurance claims. Another effective method is to visually document your home and its contents. A simple video of your home, room by room, is a good start. There is smartphone apps specifically designed to do this as well. Finally, save your inventory files digitally where they can be accessed remotely. This way you won’t have to worry about this when you are running out the door
MITIGATE RISK: There are also a few mitigation projects you can do around the house to improve your odds of success. Roof composition is very important. Also consider installing mesh screens around eaves, chimneys, and under outdoor decks. This can help prevent ember ignition. You can also landscape your property with less flammable material like rock and gravel to provide a barrier around your home. A few other items to consider: Install a fire-retardant tank and pump system; if you have a pool, install a water pump that can be used to convert pool water into a much more powerful hose. Some carriers like Chubb and Pure may reimburse some mitigation projects.
GO BAG: Imagine having just a few minutes warning before you would leave your home forever. What would you grab? This is the “Go Bag” concept. Contents we’d recommend include urgent items that you will need in the very short term: medications, safety items such as first aid kits, flashlights (it could be dark and you have no power), pet related needs, electronic device chargers, and small personal items you can never replace (such as non-digitized photographs of family etc.). Another part of your “Go Bag” process can be easily accomplished in advance and loaded into your phone or save digitally. These can be things like: neighbor contacts, opting into neighborhood emergency alerts, establishing an out-of-area contact person for your family, and critical document storage. *Clients of Filigree have access to a digital vault that allows you to securely store your vital documents such as wills, trusts, insurance policies, birth certificates etc. If you would like to learn more about our digital vault, please contact your advisor.
Words cannot explain the great loss the victims of the fires have experienced. What took a lifetime to create was destroyed in minutes. The rebuilding process could take years, and some memories and treasures can never be replaced. A key takeaway for everyone should be to stop and think about these lessons learned. Many might have thought of insurance as an expense that would never be called upon. The recent tragedy in Southern California has reminded us that it’s time to review and rethink your emergency evacuation plans and insurance coverage.
Filigree Wealth Advisors is an independent Registered Investment Advisor. We are not affiliated with any insurance provider or products. However, we’d be happy to discuss this important topic with you in more detail.