Wildfires in California have destroyed thousands of homes, and the devastating pattern is making fire insurance more expensive and complicated than ever

pulse

November 12, 2018 7:42 PM

As three California wildfires continue to ravage California, here's what homeowners need to know about fire insurance.

A trio of wildfires continues to ravage California.

Three California wildfires

More than 7,000 structures have been destroyed as three wildfires continue to burn their way through California, according to the Los Angeles Times.

Thanks to heightened wildfire activity across the state, it's becoming harder than ever for California homeowners to obtain and keep fire insurance, reported the Associated Press.

Fire insurance is a type of property insurance against fire loss or damage. Typically, a standard homeowners insurance policy will include coverage in the event of a fire.

However, it's possible you'll need to pay more for additional coverage if you live in a high-risk area or if you're not able to find coverage in the open market.

In this case, you can get insurance through surplus lines — policies that protect against financial risks regular insurance companies won't take on and aren't required to follow same state regulations, according to the AP.

As a last resort, there's the California FAIR plan. They cover up to $1.5 million for a structure and its contents in high-risk properties, according to the Los Angeles Times, but that's basic coverage — "in some cases [it] won't be enough for full replacement of a lost home and property," wrote LA Times reporter David Lazarus.

"If your whole house burned down, it used to be that you had guaranteed replacement," told CNBC. "Insurers started to rethink this and apply an absolute limit on what they will pay."

A "replacement cost" of your home covers the cost of a damaged home with a similar home, but some insurance companies can limit that at 20% over the face value of the policy, explained Mercado.

This can be particularly problematic in a largely damaged area, which can result in an uptick in prices, Hunter said. He added that insurers may also not cover additional expenses of "bringing your damaged home up to new building codes."