The Marshall Fire of December

The Marshall Fire of December, 2021 is a tragedy that has impacted thousands in Boulder County. In its aftermath, we all – those impacted and those not impacted – need to revisit our homeowners and property insurance policies to ensure we have adequate coverage. Merely clicking “renew” each year is far from adequate, and it could leave you drastically uninsured. Here’s what everyone should do:

1. Get a copy of your declarations page from your homeowners insurance carrier. Most homeowners policies have four types of coverages: dwelling or home coverage (covering your house); ‘other structures’ or ‘detached structures’ coverage (covering things like decks, sheds, detached garages, and sometimes accessory dwelling units); contents or personal property coverage (covering your clothes, furniture, pots, pans, etc…); and additional living expense coverage (covering a rental property or hotel if you need to be out of the house during repair/rebuild).
2. Try to approximate the value of each of these categories of coverages. For the house, remember, it’s the cost to rebuild or replace the home structure, not the value of the land or landscaping. For other structures, it’s the cost to replace your deck, shed, and detached garage. For contents, it covers everything from your TV to your blue jeans. Additional living expenses would be the cost to rent a similar property for up to two years. The best thing to do is to get an appraisal of the home that separates the value of the house from the land, then separately appraises each other structure. Most people don’t want to pay over $1,000 for an appraisal like this. There are alternatives, such as looking at Zillow’s “Zestimate,” looking at comparable home sales prices, and talking to friends or colleagues in the construction industry. Whatever you do, try to get the best information you can on what it would take to replace your home, replace your belongings, and replace the other structures. Look up the cost to rent a similar property.
3. Look at your policy’s coverage terms. For your home dwelling coverage, look for terms such as “refundable depreciation” or “non-refundable depreciation.” This has a big impact on how much you get from the insurance carrier if you decide you want to rebuild versus start anew somewhere else. Read the personal property coverage section to see what types of personal property, such as jewelry, art, collectibles, or musical instruments need special endorsements or riders, and make sure you get those endorsements or riders for your valuables. If you don’t, they probably won’t be covered.
4. Increase your policy limits to at least match what it will cost to rebuild your home, rebuild your other structures, replace your personal property, and cover your rental income. Yes, this probably will make your rates go up. Do it anyway.
5. Do this at least every other year, and while you’re at it, check your auto policy, and look into an umbrella policy.

Homeowners insurance often doesn’t provide the type or level of coverage most people need in the time of a catastrophic loss. Even when your house burns down, you’re still obligated to pay your mortgage and pay your property tax. When your coverage kicks in, it’s usually to replace the structure on the same piece of land. For people with mortgages, this often leaves them with little choice but to rebuild in the same location, even if it looks like the surface of Mars.

If you have any questions, the best thing you can do is contact an attorney to help you understand your policy, understand your coverage limitations, and help you better protect yourself going forward.