Wildfire Risk: A Peril for All Seasons
April 13, 2022
Something surprising happened during the pandemic: people knowingly moved in greater numbers than before to areas that had been scorched by wildfires in recent years. These moves may have been influenced at least in part by the hot housing market, with its shortage of inventory and skyrocketing prices. People also may have simply underestimated or ignored the danger, focusing instead on scenic views and peacefully remote settings. (Source: Bloomberg.com)
Warmer, drier climate is fueling more and larger wildfires across the United States, especially in the western part of the country. The blazes can occur at any time of year, including winter. This past December, for example, wildfires claimed more than 500 homes in northern Colorado.
Homeowners and business owners should be prepared to protect their safety and property year-round.
Wildfire Risk and Financial Safety
If you have a home or a business in a fire-prone area, it’s also wise to periodically review your insurance coverage. Costs to rebuild structures have recently skyrocketed, so it’s important to make sure you have enough coverage in case the worst happens.
While certain types of insurance policies typically provide protection from financial losses due to wildfire, homeowners and business owners should speak with their insurance providers to verify that “wildfire” is a covered peril. Here are how policies typically respond to this risk:
- Homeowners policy – Coverage typically includes the loss of your home, your belongings, other buildings on your property (e.g., shed), and trees and shrubs. A homeowners policy generally will cover the cost to remediate smoke damage and make other repairs and will pay for additional living expenses (e.g., hotel, meals) if you cannot stay in your home while it is being repaired. Be aware that some insurance carriers are beginning to amend policies in very specific ways as a result of wildfires. For example, some carriers have a specific wildfire deductible, are making it a special deductible (which eliminates the waiver for losses exceeding $50K), and are limiting the monthly loss-of-use benefit to 1% of the dwelling replacement cost limit, subject to a maximum of $50,000/month. So, for example, a $5 million home has a $50,000 per month cap, the same as a $20 million home.
- Auto policy – If your policy includes “comprehensive” coverage, which is coverage for damage not inflicted as the result of an automobile collision, the policy likely will cover damage from wildfires.
- Businessowners policy – This type of policy generally includes coverage for the building/space as well as equipment, furnishings, inventory and supplies within it. It also typically includes coverage for lost income as a result of a wildfire and funds for additional operating expenses. Commercial property insurance policies typically need to be endorsed to cover loss of business income and extra expense.
RELATED CONTENT: Wildfire Resources
Those who own property near canyons and other wildfire-prone areas may need to purchase a stand-alone fire policy rather than relying on a standard homeowners or businessowners policy. Also, be aware that similar to flood policies, wildfire coverage in any policy type must be in place before property is threatened by an imminent wildfire.
Annual Insurance Policy Review
A good broker or advisor is always willing to review your policy coverages and discuss the terms and limits with you. Use this resource to make sure you are educated and properly protected.
If you aren’t already a Hylant client but would like help reviewing your policy or have questions, contact us.
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The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.