Homeowners Insurance Might Not Cover All – NBC Los Angeles

Wildfire season is at our doorstep, putting many homeowners at risk of losing their homes.

And if they do, the I-Team has learned that their insurance company may not cover the full cost to rebuild. Some homeowners have learned this the hard way. But one phone call can start to help fix this problem.  

In recent years, wildfires have ripped through the state, leaving thousands homeless after their homes burned to the ground. Catherine Wilson, who lives in the mountains, is one of them. 

“All of that sense of security, that sense of having roots, the sense of coming from family, just evaporated,” she said.

The maximum amount Wilson’s insurance company would pay to rebuild her home was about $400,000. But a contractor told her it would cost more than $650,000 to rebuild. 

“Which is way more than I’m insured for and can’t afford,” said Wilson.

Wilson may have to rebuild a smaller home, or not rebuild at all and buy a home elsewhere. And other homeowners might face a similar situation if they lose their homes. That’s because the cost of building is way up, thanks to supply chain issues and inflation. The National Association of Home Builders estimates the cost of materials used in residential homes has increased 28% since January of 2021. Yet, according to the American Property Casualty Insurance Association, only 30% of homeowners have purchased additional insurance to compensate for these rising costs. 

But there is a simple fix that starts with a phone call. 

“It’s really important for people to get in touch with a local contractor and ask the average building cost right now per square foot,” said Janet Ruiz with the Insurance Information Institute.

The next step is to call your insurance agent and be sure your home insurance policy reflects that cost to rebuild. Ruiz says her group also recommends homeowners in high risk areas buy extended replacement cost coverage, which provides you even more coverage after disaster strikes. 

“In case you run into a situation we call demand surge,” Ruiz said. “After a catastrophe, if 1,000 or more homes have been total losses and burned in a wildfire, then the prices can go up because contractors are having a hard time getting supplies.”

These are all things that Wilson wishes she’d known about. But for now, she’s planning to put a trailer on her property until she figures out what she can afford next.

The Insurance Information Institute also recommends you take a home inventory with your cell phone, taking pictures and videos of everything you own.