Wildfire insurance can help protect you financially if a wildfire damages or destroys your home. However, you can’t assume that a home insurance policy will adequately cover the aftermath of a wildfire. It’s important to ensure your policy will provide enough coverage to avoid financial disaster following a wildfire.
KEY TAKEAWAYS
Most standard home insurance policies cover wildfire damage.
Home insurance can pay to repair or replace your home and your belongings, but only up to certain dollar limits.
You may need to tack on extra coverage to ensure your home is adequately covered for wildfire damage.
If you have trouble getting insurance in a high-risk area, you may be able to access a state FAIR insurance plan.
What Is Wildfire Insurance?
A standard home insurance policy from a state-approved insurer typically includes wildfire coverage. But to ease their financial losses, insurers offering policies in places at high risk of wildfires are hiking premiums, limiting coverage, or not renewing policies.
“It’s important to review the covered and excluded perils in your policy or quote to make sure wildfire is a covered peril,” said Ivan O’Neill, a certified wildland fire assessor and co-founder and CEO of Madronus Wildfire Defense, which helps homeowners reduce their wildfire risk.
Home insurance varies but often covers damage from smoke and fire to:
Your home’s structure
Detached structures, such as a garage or shed
Personal belongings
Landscaping
Debris removal
Building code upgrade (which may be optional)
Living expenses if you’re unable to occupy your home
Some policies might not cover items like landscaping and detached buildings.
California, Colorado, and Texas have the highest concentration of homes at risk of wildfire damage in the U.S.
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What Will Your Insurer Pay in the Event of a Wildfire?
What your insurer will pay in the event of a wildfire depends on your coverage and limits. In many cases, a home insurance policy will pay to rebuild or repair your home and to fix smoke damage. Repair or replacement of detached structures and personal belongings may also be included.
“If you live in a wildfire-prone area, it’s important to make sure you’re not under-insured, meaning that if your home is destroyed, you will receive enough money to rebuild a home with the same features at current new-build prices,” O’Neill said.
The amount of money you receive from a wildfire claim might not be enough to repair or replace your home. For example, a 2022 analysis by the Colorado Division of Insurance of roughly 1,000 total losses reported in a Boulder County wildfire the previous year concluded that the amount of under-insurance ranged from $39 million to $179 million.
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Note
Between 2000 and 2019, more than two-thirds (69%) of the world’s economic losses due to wildfires occurred in the U.S.
Making Sure You Have Enough Coverage
To make sure you have enough coverage for your home in case of a wildfire, consider these four types of coverage: replacement cost value, guaranteed/extended replacement cost, building code coverage, and loss-of-use coverage.
Replacement Cost Value
Replacement cost value covers the cost to rebuild your home at current prices, but only up to a certain amount. This differs from actual cash value coverage, which pays the amount of money required to repair or replace your home, minus any decrease in your home’s property value due to age or use.
O’Neill said it’s important to ask a real estate agent or general contractor about the current per-square-foot cost to build a home in your area. You should then multiply that number by your home’s square footage to arrive at an estimated replacement cost value. Once you’ve got that number, check with your insurer to see whether your policy would cover the replacement cost value.
Guaranteed/Extended Replacement Cost
In some states, you may be able to purchase an add-on known as guaranteed/extended replacement cost coverage, which pays to replace your home regardless of costs for labor and building supplies. This optional coverage kicks in if damage from a covered loss surpasses your policy’s limits.
This coverage extends your coverage by 10% to 50% of the cost to rebuild your home.
Building Code Coverage
Another option to look into is building code coverage. Since building codes in many areas have changed dramatically over the years, homeowners in wildfire-prone areas should consider obtaining additional coverage that would provide funds to comply with updated building codes if their home needs to be rebuilt.
Loss-of-Use Coverage
Loss-of-use coverage, also known as additional living expense coverage, is worth looking into as well. “This coverage is generally affordable and covers the cost of hotels and other expenses incurred while you’re unable to use your home during an evacuation or a rebuild,” said O’Neill.
Fire Prevention Services
Another type of protection that homeowners in wildfire-prone areas should weigh is a wildfire response endorsement, which you may be able to add to a standard home insurance policy.
With this coverage, a private company such as Wildlife Defense Systems or Chloeta supplements the primary response by local fire departments. Their services may include removing brush or other sources of fuel for wildfires, or applying fire retardant to your home.
Insurers that offer wildfire response coverage include:
American Family
Chubb
Cincinnati Insurance
Homesite
PURE
Safeco
USAA
Where Can You Get Wildfire Insurance?
If your home insurance policy doesn’t include wildfire coverage, find out whether you can add it.
If you’re unable to get coverage because you live in a high-risk area, you may be able to secure protection through a last-resort FAIR plan, a state-mandated program that provides access to insurance for high-risk properties. FAIR stands for Fair Access to Insurance Requirements.
In many areas that have lost homes in wildfires, insurers are non-renewing customers where they’re permitted to. But some state insurance commissioners declare a moratorium on non-renewals for at least one year after a wildfire. If you’re non-renewed by an insurer, you can appeal the decision.
You can also seek help from your state’s insurance commissioner. Before doing so, O’Neill said, you should assemble before and after photos of the damaged property, plus gather receipts for materials and labor for work such as home hardening to prevent wildfire damage.
If you’re non-renewed, one of your options is to buy coverage from an insurer that’s not approved by your state’s insurance regulator. This costs about three to six times the amount of home insurance from an state-approved insurer.
You can also buy insurance from your state’s FAIR plan. This likely is the priciest alternative.