Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
For most people who own their own home, that home is their largest single financial investment and they’re counting on it standing strong for years — decades, in fact.
But sometimes nature has other plans. California is no stranger to natural disasters, not just wildfires, the likes of which we have seen recently in the North Bay, but also earthquakes and floods.
If you’ve ever needed to file a homeowners’ insurance claim after an adverse natural event, then you already know how much you know before you got started. If you haven’t needed to file such a claim, then keep reading. We have pulled together everything you should do now in terms of homeowners’ insurance so you are prepared if a disaster happens to hit your home.
5 things to do now — before disaster strikes
1. Read your policy
You should read over your homeowners’ insurance policy at least once a year. It won’t be the most exciting 15 minutes you spend, but you’ll be more familiar with what to expect than the homeowners who don’t bother to read their policies until after a disaster hits — and you’ll also be able to ask questions about anything that seems unusual or that you don’t understand when you’re thinking clearly.
2. Document, document, document … your current home
When your home is destroyed, one of the last things you want to do is comb through photos on social media or in family albums to try to reconstruct details about your home and what was in it. But that’s exactly what a lot of homeowners find themselves doing.
If you don’t already have access to a cloud drive, then find one that works for you. (Google offers online file storage with its free Gmail account.) At least once a year, take photos (potentially hundreds of them) while you walk through every room in your house. Open all your drawers, cabinets and closets to capture their contents. Upload the photos to the cloud with the date and save yourself lots of potential future headache (and heartache).
A video could work in a pinch and it’s certainly faster — but you won’t get the same granular results as you will if you’re methodically taking pictures, and video resolution can also be too poor to really see what’s there.
“If you’ve got kids, make it a family process,” suggested East Bay Area insurance agent Ruth Stroup of Ruth Stroup Insurance Agency. It’ll help your kids gain an early understanding of what insurance is and how it works.
“I encourage people to make special documentation of unique items,” noted Stroup. “Things like artwork, antiques and gifts. You might have a picture of it in the room, but unique items are much more difficult to evaluate.”
And if it’s an item that’s particularly prized or worth a lot of money, Stroup says you should consider getting a professional appraisal.
You should also make sure you’re documenting any improvements you make to your home — adding on a deck or building an extension, for example. If you’ve recently redecorated or redone a room, it might help to save evidence of your upgrades if you don’t have time to take photos. That could be as simple as keeping your Amazon purchase or shipment notifications in a special folder in your email instead of deleting them after delivery.
3. Make sure you have enough coverage
When you bought your home and secured homeowners’ insurance for the first time, your insurance agent likely went over policy limits with you. Depending on when that was — even if it was only a year ago — you might want to look into increasing your coverage.
The policy is designed to replace your house and often any high-value items (furniture and electronics, for example) inside your house. So a policy amount that seemed absolutely reasonable when you bought the home could be wildly outdated within a few years as the cost to build a new home in your area increases.
It’s a good idea to regularly revisit your homeowners’ insurance policy and talk to your insurance agent about an appropriate amount of coverage.
“Check in with your insurance agent annually at renewal to make sure the policy still fits your needs and to correct any errors that could have occurred,” Stroup suggests. “Also, anytime you make a significant change to your home — any kind of renovation project.” If you spent more than $5,000 on home improvement, it’s probably wise to talk to your agent.
Yes, you may end up paying a bit more in insurance every month — but it will be absolutely worth every penny if you ever need to file a claim so that you can claim enough money to rebuild a home like the one you lost.
4. Fire, flood and earthquakes — are you covered for everything?
Homeowners’ policies cover wildfires, as a general rule, but they don’t all cover damage from floods or earthquakes. You don’t want to discover that your policy has excluded some specific type of natural disaster when you’re trying to file a claim for that exact disaster, so you should get a handle on what coverage your home has (and does not have) as soon as possible.
This can get especially tricky when it comes to flood insurance. The Federal Emergency Management Agency (FEMA) has guidelines and regulations that require certain homes to carry flood insurance and make the flood insurance policies available to those homeowners. However, even if your home isn’t in an area where FEMA mandates flood insurance, it’s a good idea to at least consider buying a policy. Homes in less flood-prone zones are relatively cheap to insure.
“Insurance is the only way to transfer the risk of financial loss,” says Stroup. “So preparing for earthquakes is simply a reality in California.”
Stroup understands that it might be painful to think about paying for earthquake insurance, but believes that “it’s important to look at the price and understand what the risk is.”
Increasingly, insurance carriers are refusing to offer homeowners’ insurance (including fire insurance) on homes in certain areas; alternatives like the California Fair Plan can give homeowners some protection against wildfires if their insurance carrier is balking, but it’s a plan of last resort — not something to consider if you’re able to secure coverage through traditional carriers.
5. Consider your policy limits and plug any ‘holes’
According to Stroup, some types of personal property have limits on how much you can claim, including jewelry, firearms and computers.
“For example, a homeowners’ policy might have $200,000 worth of coverage for personal property,” she says, “but only $2,500 can be used for jewelry.”
That means if you have an item that’s limited by your homeowners’ policy, you might want to consider policy supplements to boost your coverage. (Another good reason to read your policy!)
5 things to do after the disaster
1. Find a place to stay — stat
If you’re dealing with a natural disaster, odds are you aren’t the only homeowner affected. Hundreds (if not thousands) of other households might simultaneously be disrupted by the fire, flood or earthquake.
That means habitable rental housing is going to be at a premium, and probably tough to find. You can expect the rental market in your area to explode as everyone starts looking for a place to stay until their homes are ready to live in again.
The moment you think that you might be out of your home for an indefinite period of time, secure someplace else to stay. It might not be home, but it’ll beat sleeping in your car because there’s nowhere to go.
2. Ask questions about your claims (or hire someone to do it if you can’t)
If you’re feeling completely overwhelmed by the loss or damage of your property, and there’s no way you can take on the burden of dealing with a claim, then you might want to think about hiring an insurance adjuster.
Yes, an insurance adjuster will cost you some money. You’ll likely negotiate a percentage of the insurance payment with them, and that could hurt to part with — they may charge as much as 35% of the claim, which could easily eat up any additional money that they’re able to secure.
Another factor to consider is your insurance agent. Your agent might be more than willing to help walk you through the process — however, once you hire an adjuster, your agent can’t give you advice or talk to you about the claim; it all has to go through the adjuster.
“Insurance adjusters provide an important function for someone who’s unable to manage the insurance process,” Stroup noted. “But some people simply can’t afford it.”
If you think an adjuster is necessary, then hire one. If not, remember: it’s free to ask questions about your claim, and if a claims representative tells you that something isn’t covered, you’re absolutely entitled to reply: “Can you point out the clause in my policy that confirms this is not covered?”
3. Document, document, document: Develop an inventory and save receipts
If you didn’t follow the advice to walk through your home and photograph or film it, then you’ll need to “rebuild” starting with documentation — spreadsheets and photos and any other evidence you have about what was lost.
This can be done using everything from credit card and bank statements to your shopping history to photos on social media, but it’s likely going to be an arduous task. Grab the statements and shopping history first, then try to fill in any blanks with available photos.
In the meantime, don’t forget to save all your current receipts to show so you can get reimbursed for items you’ve bought since the disaster. “As soon as the event happens, you’re in the receipt-saving game,” Stroup said.
If you’re spending money on household goods or clothing or housing or any number of other items, you’ll want to keep track of it — most (if not all) of what you spend can be claimed under the additional living expenses coverage in your policy.
One easy way to do this is to take a photo of every receipt and save it in a folder in your cloud storage or on your phone. Stroup recommends for anyone who’s filing a claim to also develop an organization system that works for them.
“I would include the date that you reported the loss, whether you’ve turned in a receipt and what you were paid,” she said.
And don’t forget: you can update your list of what was lost in the disaster. “Most of us can’t get it right the first time,” Stroup noted.
4. Get ready to rebuild — now
Odds are good that your home isn’t going to be rebuilt tomorrow or the next day. But it’s best to pretend as though it might — so that when the time finally comes to start work, you’re not dithering over details.
This might be easier said than done. Rebuilding is hard, and there will likely be a lot of stop-and-go involved as building codes get hammered out and you secure the help to do the work. It can be emotionally exhausting to make decisions about kitchen cabinets and counters when you know that you’re not going to be using those features for at least a year. But you should do it anyway — you want to walk in to talk to the contractor with the tile colors picked out.
You’ll be glad you were prepared because when “stop-and-go” finally becomes “go-go-go,” no one will be waiting on you to make a building decision.
5. Keep your sense of humor
“The most important thing to keep after a loss is your sense of humor,” says Stroup. “You’re going to need it.”
And one last tip: If the power fails, eat the ice cream before it melts.
Red Oak Realty’s community has been raising funds to help contribute to those affected by the recent fires. Learn more at www.redoak-roof.org
Home Truths is written and sponsored by Red Oak Realty, one of the largest independent real estate brokers in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market, or are considering buying or selling a home, contact Red Oak at firstname.lastname@example.org, tel: 510-250 8780.