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Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

Many of our neighbors are still picking up the pieces after the fires last fall destroyed more than 7,000 homes across the North Bay.

In addition to the tragic loss, many found out that they were underinsured, and didn’t know it.

According to Consumer Reports, 60 percent of all U.S. homes are underinsured, and data shows that two-thirds of all homes damaged by the recent fires were underinsured by more than $50,000.

Let’s look at three common gaps in coverage that contributed to this tragedy after the tragedy.

Gap No. 1:

Not enough coverage on your dwelling.

Your home is insured based upon the cost to rebuild it, not its current market value. That’s a surprise to many people. But it’s true. So, thinking about “how much is my home worth?” is not the proper way to determine the amount of coverage you should have.

You should always base your insurance coverage on how much it will cost to rebuild your home.

And that can get confusing.

How much does it cost to build a new home in your area today?

That’s based on type of construction and market demand. For instance, if lots of people need to build all at once (say, after a big fire), then costs can go up.

You need a proper homeowners insurance review every year to make sure your home could be fully rebuilt after a fire or other catastrophic loss. Guesswork is the primary reason for this gap.

Gap no. 2:

Not enough coverage for your possessions.

People seldom think about how much coverage they have for all their possessions. It’s normal to assume they have enough. But people often have gaps in this area, especially if they own expensive items.

If you have expensive electronics, artwork, firearms, collectibles, jewelry, antiques, or musical instruments… you probably need to talk to your insurance agent to make sure that they are fully covered.

In addition, even if they are covered without a specific policy limit, the combined value of them may exceed your coverage limits.

Gap no. 3:

Not enough coverage to meet new building codes.

Here’s a hidden gap that’s seldom talked about.

Many homes were built years ago. They are beautiful, and all “up to code.”

Except they aren’t. Not by today’s codes anyway.

If many of those homes were built (or rebuilt) today, state and local ordinances would require that they meet current building codes. The codes back then don’t apply when rebuilding today.

Many homeowners get hurt by this at claim time. They don’t have proper coverage for building code upgrades. That coverage is often known as Ordinance & Law Coverage.

Only a local insurance professional who is familiar with local codes can make sure you’ve got enough coverage for this.

My advice

It’s critical that you have an annual homeowner insurance review with a local insurance professional. You need someone who is committed to making sure there is not an insurance tragedy after a tragedy.

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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or bruces@sackifs.com.

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