California fire raises insurance questions

[j]

From Ralph Bristow, SC:


I don't like the whole concept of insurance. I don't dislike insurance companies or agents, I just don't like betting against myself.

I bet my car insurance company that I'm going to have an accident. My company bets I won't. I'd rather be on my side, but the rules force me to bet against myself.


I bet my homeowner's insurance company that my house is going to burn down. My insurance company bets it won't. I want them to win the bet, even though I have to pay. I don't like this game, but I play it because I can't afford not to. I can afford the premium. I can't afford to build a new house if mine burns down.

Which brings me to the point of this Daily Dispatch. I need to call my insurance agent and find out exactly what does happen if my house burns down. I read in the paper this morning that many of 2,000 plus homeowners whose homes are being devoured by fire in California are not likely to be made whole by their insurance policy.

One problem is building codes. Since they built (or bought) their homes, municipalities have revised building codes. It's going to be more expensive to build replacement homes that conform to the new codes. The USA Today quotes an insurance lawyer as saying standard policies call for rebuilding structures as they existed at the time of destruction. Upgrades required by changes in building codes can add thousands of dollars to replacement costs. The lawyer says many homeowners decline the extra coverage.

You could say, well, that's their problem. They could have upgraded their insurance, but chose not to. Do insurance agents routinely call their customers to tell them when a code upgrade has gone into effect that will increase the replacement cost of their homes? I don't know the answer, but I suspect not. In that case, who's responsible for the resulting 'insurance gap?' Is it the homeowner, or the insurance professional who's advising him?

Here's another question. My house is about 40 years old. Although I'm sure it's value has increased some in 40 years, it would cost much more than it's market value to build a new house the same size and design? I know that because I priced new houses also before buying one that's 40 years old. Will my insurance pay the full cost of building a new house, or will it only pay me the market value for my house. And what about the cost of living somewhere else while my new house is being built? Is that covered? I should know the answers to these questions but I don't. I simply depended on my agent to sell me what I need, without knowing for sure exactly what I need.

I'm obviously not a very good insurance consumer. I think that's because I don't like the concept of insurance, so I buy it begrudgingly, with as little information as necessary to cover myself in case I win the bet. Now, I'm not really sure I'm actually covered. Are you?

[Stephanie]

Good point j! It does leave alot of unanswered questions!

[stormy]

something to think about. another question i have is, which insurance companys give u a hard time, which r easy to deal worth??? i just hope i never have to find out. they also say if u have replaceable insur. then u need to video it all, because if u do not have proof they wont replace, no matter how much the value of ur insur is. i really dont like them either.

[stormchazer]

In CA is bound to raise insurance rates too.