Wildfire Season Meets a Coverage Crunch: How Property Owners Can Avoid Claim Shock

Preparing for wildfire season usually meant focusing on having an evacuation plan in place and shoring up defensible space around a property. That was then; this is now. Today, California’s home insurance coverage market has changed as wildfire risk and rebuilding costs have climbed. The situation has prompted insurers to pull back on some coverage, even raising rates and limiting new policies. For property owners, it’s turned into a real crisis.

It means more homeowners are being pushed into California’s FAIR Plan which is an insurer of last resort with basic property coverage for homeowners who can’t get a standard policy in the private market. Along with that has come copious amounts of confusion and unpleasant surprises that wait until after disaster strikes.

Too often property owners don’t know what’s in the policy, and what’s not covered. While insurers pulled back beyond the highest risk zones, FAIR plan enrollment has surged 152% since September 2022 in California. The FAIR Plan often covers fire damage only, so many homeowners are forced to buy a second policy to cover other everyday risks like water damage, theft, and liability.

Start by Confirming Basics Now

Homeowners should be able to understand their coverage in plain English, not complicated policy terms. That means making sure essential information across FAIR and secondary policies match. To this end, there are three checks to can help keep the process on track when urgent attention is what’s needed.

1. Understand what is covered by which policy: If one policy primarily covers fire damage, what covers water damage, liability, theft, and other common losses?
2. Verify essential information consistent across policies: It’s important to make certain the insured’s name, address, mortgagee, and effective dates match. Discrepancies can create unnecessary delays.
3. Know who should be contacted for what: In split coverage scenarios, it’s critical to understand who covers what. Contacting the incorrect carrier regarding smoke or suppression related water damage can create additional delays and confusion.

It’s also important for policyholders to confirm the wildfire adjacent provisions that can create some of the biggest and most nauseating surprises. These include whether rebuilding limits feel realistic for today’s costs, whether the policy covers code-mandated upgrades and the cleanup and removal of debris, how smoke remediation is treated, and what temporary housing and living costs it will cover, and for how long.

Other States Should Not Assume They Are Different

While recent historic wildfires in California have magnified the issue, it’s not confined within the state’s borders. The broader dynamic at play is a regional one with wildfire exposure expanding across the western states. For those like Oregon and Washington, here too underwriting is tightening as more households end up with the most basic coverages.

Washington’s FAIR Plan notes key limitations too, including that it doesn’t cover theft or liability and it won’t cover money lost because the property can’t be used, like missed rent or lost business income. Oregon’s FAIR Plan similarly focuses on basic coverage and emphasizes wrap around, or secondary policies to provide more broad protection.

The takeaway for other states is fairly straight-forward. Insureds should not assume their policy is comprehensive just because it’s active. It’s critical to confirm what you have now, while you still have options, before disaster strikes!

Claim Surprises After Smoke, Embers, and Water

When most people think of wildfire losses the first thing they think of are the flames. But many claims are messier in reality. Damage can show up as smoke odor, ash, and even water damage. Unfortunately, in these scenarios, there is not a “one-size fits all” solution.

• Smoke and Soot Damage: Treated as minor until the homeowner can document scope. It’s important to also be aware, cleaning too early can erase important evidence for a claim.
• Contents and Belongings: Everything you own inside the property can be vastly undervalued without a proper inventory. Taking photographs and video long before disaster strikes is the best defense as going from memory usually means losing out.
• Displacement Often Lasts Longer than Expected: If property owners are displaced, the time out of the home or business often stretches beyond what was anticipated. Temporary living coverage can be depleted earlier than expected.
• Suppression Related Damage: Efforts to save a property often create secondary damages, including water intrusion and debris, which can expand the loss and further complicate valuation.

These aren’t edge cases. They are predictable problems and the most common ways wildfire losses evolve into long, frustrating claims. The good news, many of these headaches can be prevented if homeowners understand their coverage, document what they own, and avoid rushing to cleanup or major repairs. Following those simple steps means policyholders give themselves a far better chance of getting the full scope of the loss recognized and paid.

Two Pre Loss Habits Make Claims Easier to Value

First, start with a simple home inventory. A quick, room-by-room video walkthrough is often enough to achieve this. During the walkthrough open closets and cabinets and capture major items. Also, photographing the exterior including the roof and any recent upgrades can be quite helpful as well.

Importantly, make sure to save it to the cloud. If fire destroys computer hardware, the video will be lost forever. If records are not backed up, assume they will not survive a total loss.

Second, set up a system for expense tracking before you ever need it. Just a single folder for receipts and a note on what each expense was for can help protect reimbursements for things like alternate living arrangements while the property couldn’t be occupied. For businesses, the same discipline applies.

What Not to Do in the First 24 Hours

After a loss, homeowners often make the claim harder by trying to be helpful. They meant well, but efforts to clean up and repair damage can be devastating to recovering their losses. That said, it’s critical to follow these three steps:

1. Document before you discard: Damaged items should not be thrown into the trash until they are photographed and listed on an inventory of losses.
2. Avoid major repairs until scope is documented: While emergency mitigation efforts are important, permanent repair work must wait.
3. Do not guess or minimize: Always be careful of what you say early in the claims process. Early statements that downplay get repeated. When speaking with a carrier, stick to observable facts like what happened, when, what you can see or smell, and what immediate steps you took to prevent more damage.

Keep in mind, the first estimate is almost always a starting point. Fast settlements might seem appealing for all of the obvious reasons, but they often shortchange the policyholder. Thorough, well-supported claims are most likely to end up providing the fullest compensation possible.

Public Adjusters Are the Insured’s Advocate

Public adjusters represent the policyholder, not the insurer. In FAIR and split coverage situations, their value is often execution. They help with organizing documentation, translating policy language into practical steps, and present a complete scope so the claim does not stall or get undervalued.

Property owners cannot control the coverage market. They can control whether they understand what they have, preserve their records, and avoid early mistakes that remove evidence. Those steps reduce stress for the policyholder and reduce friction for everyone involved in the claim.