In the wake of devastating wildfires, one of the most common questions homeowners ask is: How do I read and understand my insurance policy? Whether you're facing a total loss or a partial loss, or just smoke damage, the process of interpreting your coverage can be daunting. Here’s some basics:
Visible and Invisible Buckets in your Policy
Many people mistakenly look only at the dwelling cost listed in their policy. While this is important, your policy contains several other "buckets" of coverage that can significantly impact your final payout.
Dwelling Cost: This is the base amount your house is insured for, the replacement cost.
Extended Replacement Coverage: Some policies offer an additional 25–50% above the dwelling cost to account for unexpected rebuilding expenses.
Ordinance Law Coverage (Code Upgrade): This is critical for older homes. It covers the cost of bringing your property up to modern building codes because chances are your house was built to an earlier and weaker code. Many standard policies only offer 10% coverage, but for older homes, 50% is often necessary. Without sufficient ordinance law coverage, you may face significant out-of-pocket expenses.
Debris Removal: Includes the cost of clearing rubble and preparing the site for rebuilding.
ALE (Adjusted Living Expense) or Loss of Use: These parts of your policy compensate you for living out of your house during the rebuilding or for the loss of use.
Property: These buckets are for the tangibles, clothing, furnishings and the like. The only way to address this is thought old photos of the rooms and any receipts.
Ask your insurance company for a printed out tally of the loss so you can compare it to your endorsement sheet. It can be as easy as going down the policy and making sure all categories are fully paid.
As-Incurred Costs: Some policies will cover expenses like architectural plans, structural engineering, soil engineering, survey, and permit fees as they arise. These are often substantial upfront costs. The good news is that these costs are outside of the policy limits, in addition to your policy total, so these costs don’t have to eat into your rebuilding bucket.
When do you need a Public Adjustor?
Public Adjuster: These specialists are licensed and advocate for policyholders but often charge 5–10% of your claim so you have less money in the end. So when do you need this help?
· Total Loss: If your home is completely destroyed, your insurance adjuster will determine this status. Total loss claims typically involve all coverage buckets, including dwelling, extended replacement, debris removal, and ordinance coverage being paid and so are straight forward and can be resolved relatively quickly. For a total loss we would recommend you not hire a public adjustor or anyone taking a cut of your rebuilding account. You will need all the money you can tore build.
Note: If the process gets difficult you can always hire a public adjustor but try it first on your own and with help from publicly available resources.
· Partial Loss: For damages where some only part of the structure is damaged, your payout will focus on repairs rather than full replacement. In this case you will likely need both a public adjustor and a contractor experienced in insurance work, like our firm.
The insurance companies use a software called Xactimate to quantify your loss. This program averages costs so is probably not accurate to what you had. It does not do well with custom finishes or traditional finishes. If you have a 1980’s condo you will be fine. If you have a 1930’s Craftsman or 1920’s Spanish Revival or even a 1960’s Mid-Century, the program will treat your house as a 1980’s condo. A contractor will be needed to present the public adjustor with a quote for what the real cost to restore your house will be. The public adjustor will then work with the insurance company for final resolution.
You can try this process with an experienced contractor who works with insurance companies first, and if you hit a wall, you can then bring in a public adjustor.
Resolution for a partial loss can take time as the insurance company fights you to try and get you to accept the lower cost from the Xactimate program.
Understanding your insurance policy is crucial to rebuilding after a disaster. Take the time to review all the buckets of coverage your policy offers, from dwelling costs to ordinance law. If in doubt, seek out publicly available resources or professional advice. Companies with expertise in rebuilding and insurance claims can guide you through the process, ensuring you maximize your payout. Rebuilding is never easy, but with the right knowledge, you can avoid unnecessary financial strain and move forward with confidence.
If you’re unsure about your coverage or need guidance, we’re here to help. Reach out to us for a consultation—we can provide the expertise you need during this challenging time.
