Monday, December 24, 2018

What is Loss of Use Coverage?

Camp Fire in Northern California and the Woolsey Fire in the southern part have been the most devastating the state has ever seen. While the loss of life is tragic, the plight of those who survived, but lost their homes to the flames should not be forgotten. Most of them will be looking towards their homeowner’s insurance policies to help them rebuild their homes and their lives.  Many of them may be in for a rude shock: they may find disturbing things.

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Rebuilding cost is not enough

Most homeowners plan on their coverage based on the cost of rebuilding their homes – or repairing them if they are lucky enough not to have lost them completely. What they do not take into account is the time it will take to have a home to live in again. It could be months, or even years.

Where will the family live until then? How much will it cost? Can they afford to pay rent for such a long period? There will be many other expenses not covered by insurance after wildfires end.

That it could be a year or more before a home is rebuilt or repaired may seem to be an exaggeration. However, history shows that it is not. After a large residential area is devastated by fire, the contractors who work in the area are overwhelmed with calls. It could be months before any of them is free to take on a project.

In addition, the demand for building supplies and materials will be huge, although shipments to the affected area will be fast. This could cause delays even for those who are lucky to start early the project.

Those who suffered through the 2017 Napa fires have firsthand knowledge to testify to such delays. It will cost a lot of money for a family not only to survive but also to pick up the pieces, while waiting for their home to be ready for occupation.

Loss of use coverage is essential

Loss of use coverage protects your family if you lose the use of your home. A homeowner’s insurance policy that includes loss of use coverage takes care of the living expenses of the occupants of the home until the home is ready for occupation again.

Depending on the coverage that the policy offers, loss of use can include payment of expenses that would not exist if the home had not been lost in the first place. For example, it could cover any extra commuting costs, food expenses etc.

If your homeowner’s insurance policy does not include loss of use coverage, you should act immediately, to modify the policy and provide for this additional and essential protection. If the coverage exists already, it is critical to ensure that it is enough to cover the living expenses when your home is not going to be ready for occupation for a long period.

Calculating how much coverage is required can be rather complex because of the various factors you need to consider. An experienced insurance broker is the best person to guide you through the process and ensure your family’s full protection.

In California, wildfires are no longer seasonal; they are now the new normal.

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