Two years ago, I lost my home in the Four Mile Canyon wildfire. Shockingly, 70% of the victims were stunned to realize they were under insured.
Homeowners insurance relies on a complex system of numbers, letters, riders and endorsements that are not common across insurance carriers, making it nearly impossible for consumers to know what exactly they are purchasing. If a customer doesn’t know that their situation calls for a particular rider or endorsement – for example, Boulder County building code compliance can add up to $45 per square foot to rebuilding costs – they won’t know to purchase it.
At the same time, insurance agents know that consumers want coverage that fits their budgets. They often quote a pared down policy to win the business and encourage the client to increase coverage later – a strategy that leaves many customers under insured. Agents work for the insurance companies; it is up to you to secure the proper amount of coverage.
Having experienced home loss and the financial aftermath first hand, I offer these lessons to homeowners who want to prepare and protect – whether they have been affected directly by the recent wildfires or not.
Lesson #1: Shop Around and Learn
Even if you like and trust your agent, talk to other agents and companies. You will learn a lot – including things your agent hasn’t mentioned and risks you haven’t identified. Ask your agent for a new complete copy of your current policy and read it – the fine print will surprise you and help you fall asleep.
Things to do: Make sure your policy allows for two years of Alternative Living Expenses (ALE). It will take longer than two years to put your life back together, but one year ALE – common in many policies – is not enough. Visit with your agent every year and document the conversation. If you upgrade your property, call them and send an email.
Lesson #2: Create a Key Documents Archive
In a large or total loss, you will be required to list every single item you owned. And, you will need access to crucial documents that demonstrate ownership, relationships, credentials and more.
Things to do: Scan and store on a CD or a thumb drive the following crucial documents (get help if you need it):
- building plans for your home
- passports
- certificates of achievement related to your livelihood
- tax returns
- title work
- documentation of conversations with your insurance agent
- any documents that would be hard to replace (e.g., credit cards)
- pictures of the contents of your home – with drawers and cupboards open, including multiple pictures with close ups
You have been meaning to do this with all of your photos too, remember? This record is for your eyes only, so don’t bother cleaning house: just do it this next weekend. Make two copies; store one in your safety deposit box and another with a trusted friend or relative in another state.
Lesson #3: Get Your Files Into the Cloud
It doesn’t do any good to have your files – from valuable work documents to irreplaceable family photos and your music collection – backed up on a drive in the same building as your computer. That’s fine if your computer crashes, but not if you lose the whole house.
Things to do: Sign up for offsite data storage of your data/media files.
Lesson #4:Create a Family Evacuation Plan
Even if you are fortunate enough to have a couple of hours to evacuate, doing so is a frightening and often frantic experience. A plan for evacuation can help you focus. And, planning gives the family a chance to talk about what is important to you and your children.
Things to do: Meet with all household members to create a list of what to take. List the items and their locations; post the list in an unlocked cupboard or drawer. In an emergency, one person can quickly direct others as they locate the items. You might include:
- cell phone and charger
- comfy clothes
- computer
- photo albums
- jewelry
- sentimental or historical valuables
Decide how to contact each other if communication lines are down for an extended period of time and where to meet in an emergency. Get a $10 analog phone in case of a power outage. Create an evacuation stash with a couple of gallons of water, canned protein (e.g., beans or tuna), crackers, cash and a flashlight to take or to get you through an outage.
Lesson #5: You Really Can Prepare
Eventually, something will happen and you can be intelligently prepared: illness, loss of employment, weather-related destruction, or aging. Action will be required and taking it now is usually easier. If you will do one item from this list, you position yourself for a better outcome – no matter what’s coming.
Be generous and kind to friends that have just lost everything. Offer meals, gift cards, nice clothes, babysitting, massage, good wine. Don’t say, “It’s only stuff.”
If you have just lost everything, expect the insurance claim process to be a full-time unpaid job for one member of the family for a full year. Proceed cautiously; take your time with the claim, nurture the relationships that matter the most and you will get through this great loss.
