A Stark Reminder: Are You Protected?

January 24, 2025

As we watch the devastating wildfires ravage California, our hearts go out to the families who have lost their homes, livelihoods, and sense of security. The images of burned-out neighborhoods and displaced residents are a sobering reminder of the importance of protecting our own homes and assets from similar disasters here in Alberta.

Putting Yourself in Their Shoes

Imagine receiving an evacuation order, grabbing a few precious belongings, and fleeing your home as flames close in. The uncertainty, fear, and loss that follow are unimaginable. As we witness the resilience and determination of Californians rebuilding their lives, we’re reminded of the critical role insurance plays in recovery.

Ensuring You’re Protected

In Alberta, we face similar wildfire risks, especially during our dry summer months. It’s essential to review your home insurance policy to ensure you have adequate coverage. Consider the following:

Have You Informed our Team of Home Updates?

Keeping your insurance company informed about updates to your home is crucial. This includes:

New roof installations
Upgraded water heaters or furnaces
Finished basements or other renovations

Failing to report these updates can lead to inadequate coverage and potential claims issues.

Is Your Additional Living Expense Coverage Sufficient?

In the event of a natural disaster, rebuilding your home can take substantial time. Ensure you have sufficient Additional Living Expense (ALE) coverage to:

Rent a temporary property
Cover additional expenses during rebuilding

Typically, ALE is a percentage of your home’s value. Consider increasing this value to ensure you’re adequately protected.

Are Your Valuable Items Adequately Insured?

Don’t overlook valuable items and collectibles. Ensure you have sufficient coverage for:

Jewelry
Artwork
Rare collectibles
Other high-value items

Separate insurance policies or riders may be necessary to adequately protect these items.

Is Your Home Up to Current Building Code Standards?

If you own an older home, it may not meet current building code standards. Consider:

Upgrading electrical or plumbing systems
Ensuring fire safety standards are met

Your insurance company will only pay up to your building code coverage maximum. If you anticipate needing extensive upgrades, consider increasing this coverage to protect your investment.

By carefully reviewing these aspects of your home insurance policy, you’ll be better equipped to handle the unexpected and ensure your home and assets are protected.

Rebuilding or Taking a Payout: What’s Right for You?

If your home is destroyed in a wildfire, you’ll face a difficult decision: rebuild or take a payout. This decision can have significant financial implications, so it’s essential to understand your options.

Rebuilding

If you choose to rebuild, your insurance company will pay to reconstruct your home according to your policy terms. This means:

Your insurer will cover the cost of rebuilding your home, including materials, labor, and permits with guaranteed replacement cost coverage.
You’ll need to work with your insurer and a contractor to rebuild your home.
The rebuilding process can take several months to a year or more, depending on the complexity of the project and the extent of the fire.

Taking a Payout

If you decide not to rebuild, your insurance company will provide a payout based on your policy terms. This payout is typically based on the Actual Cash Value (ACV) of your home, which takes into account:

The age and condition of your home
The cost of replacing your home with a similar one
The limit of your insurance policy

Here’s an example:

Let’s say your home is insured for $500,000, and it’s destroyed in a wildfire. The ACV of your home is determined to be $400,000. If you decide to take a payout, your insurer will provide a payment of $400,000, minus your deductible.

Keep in mind that taking a payout may not provide enough funds to purchase a similar home in the same area, especially if housing prices have increased since you purchased your original home.

Take Action Today

As you reflect on the California wildfires, take a moment to assess your own preparedness. We’re here to help you:

Review your policy to ensure adequate coverage
Discuss any concerns or questions you may have
Provide guidance on increasing coverage for building code standards, inflation, and valuable items

Our thoughts remain with the people of California as they rebuild and recover.