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Check a Home's Fire Risk Before You Buy It
By Jeff Lazerson
What I think: California’s topography is more rural than you might think.
An astounding 25 percent of California’s 8 million detached houses are designated as high fire risk or very high fire risk, according to Nancy Kinkaid, press secretary to California Insurance Commissioner Dave Jones.
California’s drought-driven days and high temperatures don’t help. California experienced the highest average temperature every recorded for July at 79.7 degrees.
Yesteryear, wildfires were a rural issue. Due to something called the urban wildland interface (development pushing out to more rural areas), more and more homes are in the crosshairs of these horrendous events.
If you are out looking for your dream home or even a rental investment, do yourself a big favor by calling your insurance agent or broker to better understand the affordability as well as the insurability of that property before you write that offer. You should certainly expect to pay more for a policy if the property is deemed high risk or very high risk.
Some properties are not fire insurable. For those properties, your fire insurer of last resort is the state-run California Fair Plan. Kinkaid reminds me that you will still need to separately insure that property for general liability, theft and other types of damage, as the Fair Plan is strictly for fire coverage.
The only reason an insurance company can cancel an existing policy is for material misrepresentation or non-payment of your premium, according to Kinkaid.
But fire insurers can legally deny your renewal when the policy expires. If that happens, shop for other carriers. And use the California Fair Plan as a last resort.
Having enough coverage can be critical for your ability to rebuild in the event of a fire.
Land may hold a small amount of the home value or a large amount. Land does not burn. So, there is no need to insure the property value or sales price.
Lenders will require your coverage to be equal to or greater than the loan amount you are taking out. If your dwelling coverage is less than the loan amount, your lender will require the replacement cost estimate from your insurance company. You can find the replacement cost estimate on your appraisal.
Be sure your coverage includes property upgrades and personal property like jewelry and art. Make an inventory. Take pictures. Video your home inside and out. Keep a record of those valuable items.
If you suffer a loss, your insurer is going to write you and your mortgage servicer a check based upon your claim. Those funds are for reconstruction.
“You are still obligated to make your mortgage payment,” said Tony Cignarale, deputy commissioner of consumer services and market conduct at the California Department of Insurance.
Sometimes, payment moratoriums are declared by the likes of mortgage giant Fannie Mae. Don’t assume you are under any payment moratorium. Check with your servicer before you withhold payment.
If your home is in a declared mandatory evacuation area but you have no direct property damage, you can make an insurance claim for additional living expenses. This covers food, storage, etc. without a deductible, according to Kinkaid.
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