Our community is in pain again, suffering from the most destructive fire in our state’s history. We mourn the likely loss of two lives, the destruction of nearly a thousand of our homes, and the pets and valuables that could not be saved. If you haven’t lost your home, you probably know someone who is. They are classmates, colleagues and friends.
While there is much to mourn, President Joe Biden’s declaration of a federal disaster area gives us access to resources to help recover and repair. When we suffered the 2013 floods, our losses were compounded by the fact that flooding was not a risk covered by most home insurance policies. As devastated as we are by the forest fires that have engulfed our densely populated community, standard insurance policies cover damage caused by forest fires.
When we think of catastrophic loss, we think of those who lost their home or made it uninhabitable. The disaster declaration is for “wildfires and straight line winds” and applies to all of Boulder County. Many of us were gone on vacation and came home with a refrigerator full of rotten food and frozen pipes ready to burst.
Your home insurance comes first when it comes to losses from this disaster. This insurance is best used for large claims. If you have a $ 1,000 deductible, most insurance experts will recommend that you not file a $ 2,000 claim. A claim would appear on a CLUE report, which is like a credit report but for insurance claims, and could cause your carrier to increase your premiums or even abandon your coverage. Assuming you have a covered loss that will total several thousand or more, you will likely file a claim.
Along with the presidential statement, you must register online with FEMA. This aid is intended to help cover losses which are not already covered by the insurance. The FEMA Individual and Household program assists people who need to repair or replace their existing residence, property, including vehicles, moving expenses, and temporary housing assistance. There are also low interest SBA loans available to many homeowners and tenants.
I fear that many of those who have lost their homes will find their housing coverage insufficient for the cost of rebuilding in a time of inflated building material costs, labor shortages, and as thousands of your neighbors are also trying to rebuild. If you’re lucky, you may qualify for extended replacement coverage that can increase your housing limits 20-50% above policy limits. Even better (and rarer) is guaranteed replacement coverage that will rebuild your home no matter what the cost.
While you’re looking for another place to live, be aware that home insurance policies usually have loss of use provisions that could cover your temporary housing and relocation expenses. For homeowners, this is typically defined as 12-24 months’ rent while you rebuild your home. It can also be a dollar amount shown that is a percentage of your home’s coverage limit. Renters’ insurance will often cover a modest amount of this coverage.
If you are not getting the answers you need from your insurance company, one option is to seek an independent expert to represent you. They are paid by collecting a percentage of your complaint and run the gamut of approaches from aggressive salespeople to advisory experts. I would focus your research on adjusters who are members of NAPIA (napia.com), the National Association of Public Insurance Adjusters, and who are willing to share their clients’ referrals. Another recommended resource is United Policyholders (uphelp.org/disaster-recovery-help/marshallfire/), a non-profit organization focused on advocacy and education for people navigating the insurance process after a loss.
Insurance has become so much of a marketing game that an excessive emphasis is placed on costs and premiums. While these shouldn’t be ignored, what you need is an insurance company to support you at the time of the claim. After all, you don’t care what the stars of the sport will offer them and football games are adorned with their logos if the insurance company does not intervene when you have suffered a loss.
Finally, whether your loss is catastrophic or moderate, if you don’t already have a tax preparer, you should consider finding one now. Many businesses in the area are not taking on new customers, so this can be a bigger challenge than you might think. With reporting a presidential disaster area, you may be able to deduct your unreimbursed losses on your 2020 or 2021 tax returns. Now would be a good time to have a tax expert in your area.
David Gardner is a Certified Professional Financial Planner with Mercer Advisors and practices in Boulder County. The opinions expressed by the author are his own and are not intended to serve as specific financial, accounting or tax advice. They reflect the judgment of the author on the date of publication and are subject to change.