Our community is hurting again, suffering through the wake of 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 animal companions and treasured objects that couldn’t be saved. If you haven’t lost your home, you probably know someone who does. They are classmates, coworkers and friends.
While there’s much to grieve, President Joe Biden’s declaration of a federal disaster area gives us access to resources to help recover and repair. When we suffered through the floods of 2013, our losses were compounded by the fact that flood is not a covered peril with most homeowners policies. As thunderstruck as we are by wildfire overtaking our densely populated community, standard insurance policies do cover wildfire damage.
When we think of a catastrophic loss, we think of those who have lost their homes or had them rendered uninhabitable. The disaster declaration is for “wildfires and straight-line winds” and applies to all of Boulder County, so it could be a downed fence or damage wrought by your neighbor’s lawn furniture propelled by hurricane-force winds. Many of us were away over the holidays and came home to a fridge full of spoiled food and frozen pipes poised to burst.
Your homeowners insurance comes first when it to losses suffered from this disaster. This insurance is best used for significant claims. If you have a $1,000 deductible, most insurance experts will recommend that you don’t file a $2,000 claim. A claim would go on a CLUE report, which is like a credit report but for insurance claims, and could lead your carrier to increase your premiums or even drop your coverage. Assuming you have a covered loss that will total in the many thousands or more, you will probably be filing a claim.
With the presidential declaration, you should register online with FEMA. This assistance is to help cover losses that are not already addressed by insurance. The FEMA Individuals and Household Program helps people who need to repair or replace their existing residence, possessions including vehicles, moving expenses and temporary housing assistance. There are also low-interest SBA loans available to many owners and renters.
I fear many who lost their homes will find their dwelling coverage to be inadequate for the cost of rebuilding in a time of inflated building supply costs, a labor shortage and while a thousand of your neighbors are also trying to rebuild. If you’re fortunate, you may have extended replacement coverage that can boost your dwelling limits by 20 to even 50% above policy limits. Even better (and rarer) is guaranteed replacement coverage that will rebuild your home regardless of cost.
While you are looking for another place to live, know that homeowners policies typically have loss of use provisions that could cover your temporary housing and relocation expenses. For homeowners, this is usually defined as 12 to 24 months of rent while you rebuild your home. It can also be a stated dollar amount that is a percentage of your dwelling coverage limit. Renters insurance often will cover a modest amount of this coverage.
If you’re not getting the answers you need from your insurance company, one option is to look for an independent adjuster to represent you. They are paid by collecting a percentage of your claim and run the gamut in approach between aggressive salespeople to consultative experts. I would focus your search on adjusters who are members of NAPIA (napia.com), the National Association of Public Insurance Adjusters, and who are willing to share client references. Another recommended resource is United Policyholders (uphelp.org/disaster-recovery-help/marshallfire/), a nonprofit organization focused on advocacy and education of people who are navigating the insurance process after a loss.
Insurance has become so much a marketing game that the focus is inordinately on costs and premiums. While these should not be ignored, what you need is an insurance company that stands behind you come claim time. After all, you don’t care what sports stars will shill for them and football bowl games are emblazoned with their logos if the insurance company does not come through when you’ve suffered a loss.
Finally, whether your loss is catastrophic or moderate, if you don’t already have a professional tax preparer you should consider finding one now. Many firms in the area are not accepting new clients, so this may be a bigger challenge than you realize. With the declaration of a presidential disaster area, you may be able to deduct your unreimbursed losses on your 2020 or 2021 tax returns. This would be a good time to have a tax expert in your corner.
David Gardner is a Certified Financial Planner professional at Mercer Advisors practicing 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 as of the date of publication and are subject to change.