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Don't Be A Victim To An Underinsured Home After A Wild Fire

If you live in a state that is prone to wild fires like Colorado or California it is likely your home may not be properly insured. Each year wild fires ravage the Front Range and mountains of Colorado but according to local insurance agents only about 35% of homes are properly insured. This means that if your home was destroyed in a wild fire it may not have enough coverage to be rebuild as it was. Don't be a victim to an underinsured home if a wild fire consumes your neighborhood by reviewing your policy each year.

In Colorado the Hayman Fire in 2002 was a devastating fire that destroyed 133 homes of which it is said that only half of them had proper insurance to rebuild. Some might blame the insurance agent for inadequate coverage but unfortunately it ultimately rests on the homeowner to make sure they have the coverage to rebuild. The homeowner is the only one that knows if they have remodeled a kitchen or added a deck to the house. For this reason it is wise to update your policy each year with any changes to your home.

Annual policy reviews with your insurance agent

Schedule a time each year with your insurance agent to review the policy and confirm proper coverage. During this review you can update the policy to show any improvements to the home including kitchen remodels or additions to the structure. The agent will be able to determine based on current reconstruction costs how much coverage will be required. The worst thing that can happen is remodeling your home then having a fire destroy everything just to find out you didn't update your policy.

This is also a great time of year to check for any possible discounts that may help reduce your premium on the fire insurance policy. Discounts could include a new roof or added alarm system that can save 10% to 20% depending on the company. If you are not satisfied with your insurance company it can also provide a good excuse to shop fire insurance quotes. Make sure when you get quotes to include the proper coverage you need so it is close comparison to your current policy.

Reconstruction versus taking cash value

When you own a property in a fire prone area there are many questions you need to ask yourself about the type of coverage you want for the home. Like we mentioned earlier most homes are underinsured and this can cause a tough scenario when they need to rebuild a home. Some residents in these areas have vacation properties so their primary residence is not impacted but many have their primary residence right in the fire's path. If you have replacement coverage on your home fire insurance policy it will only allow you to rebuild the home up to the coverage limit.

The home will also need to be rebuilt in the same area instead of a new city. Because many homes are underinsured the homeowners are faced with taking the cash value of the insurance settlement because it provides a money payout. The cash value is much less based on depreciation but is often a homeowners only option because the policy was not properly updated to provide current reconstruction cost coverage.

Key Takeaway

Even if you live in a city suburb it is wise to review your policy each year so you are properly protected against losses like fire or tornadoes. Unfortunately people that live in areas that they considered immune to wild fire have seen devastation in recent years. Consider the neighborhoods of Waldo Canyon in Colorado Springs who recently saw the destruction a wild fire can have on a tightly bunched neighborhood. Over 340 homes were lost and many of these homes were primary residences in a suburb of a big city.

Review your fire insurance policy and update the company any time you make improvements to your home. It is also a reminder of the dangers of fires so make sure your family has a plan in the event a fire does break out.

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