What’s In A Home Insurance Policy? Know The Details Before A Fire Occurs

With the tragic fire that occurred in Lahaina, Maui, it's important to review your home insurance policy and understand what it does and does not cover. You also need to have contingency plans in case your house burns down.

If you have not done so already, call your home insurance company to review your coverage details. You don't want to be caught underinsured in case the worst happens.

In 2017, a Financial Samurai reader named EJ lost his home to the Tubbs Fire in Northern California. The fire was started by a private electrical system that ended up destroying 5,643 structures.

Luckily, he and his family were not hurt. I asked him to share his experience as well as what he learned dealing with the home insurance company.

Note: Thank you to the 300+ FS community newsletter and post readers who have donated over $40,000 directly to United Way Maui Relief Fund and the Maui Strong Fund. I will be spending the next month signing and sending copies of Buy This Not That to each and every one of you. Due to overwhelming demand, I'm short about 70 books, so please bare with me as I order more.

A Fire That Came Out Of Nowhere

In 2017, we were living a good doctor’s life. A $1.2 million dollar home with a killer sunset view. Life was wonderful, but I was still quite stressed given I had mortgage and student debt. I had the kind of stress that affected me not only internally, but also externally. Affecting both work and relationship with my wife.

It was crazy to think that stress and a mortgage can be that powerful, but it was. In fact, I would walk around my home and think about how we had about 1,000 square foot of home more than we needed. It was 3,300 square foot and I determined that 2,000 to 2,500 square feet were a much better home size for us.

But here we sat, 11 months after buying a big home with unnecessary financial stress. Then overnight… POOF! It all went up in a flash.

Someone knocked on our door at 2 am waking us up. We left with our lives and health, although not much more. Others were not as fortunate and I have seen and felt the impact of those losses in our community. So I write this post knowing how lucky we are. And I am thankful for that.

Key points from the post:

  1. Why being a homeowner may be better than being a renter when disaster strikes
  2. How home insurance can actually make you much wealthier
  3. Know exactly what is covered under your home insurance plan
  4. Itemize everything in a spreadsheet and a picture catalog
  5. It may be better to have a complete loss rather than partial damage

Breaking Down A Home Insurance Policy

Our home before the fire

Here's a home insurance primer on what is important when purchasing a policy. We lost our home, but by being well insured we are covered for not only our possessions and rebuilding, but also for our rental.

After the fires, both home prices (for sale) and rental prices actually skyrocketed. This was an unexpected surprise. But it was classic market supply and demand with a steroid boost of large amounts of insurance money.

That is why Loss of Use Coverage is so important and the first thing we talk about today.

Loss Of Use Coverage In A Home Insurance Policy

Coverage D: Loss of use and rental

In the land of fire and mass chaos, owning is better than renting (seems counterintuitive, but true). I talked to many people who were renters who were evicted since the fire. The landlords asked their tenants to leave so that either the landlord or one of their family/friends who lost a home could move in. 

This put tenants in a bad position because now they were stuck in a town with a housing shortage and now higher prices. They had no choice, either pay more for a similar rental in town or move further out of town. Plus, unlike those who were insured and lost their home, tenants being evicted had little no insurance to help them through this.

Many Owners With Insurance Actually Came Out Fine

For owners, the situation was better, but it was only as good as the home owners insurance purchased.

I was well insured. My insurance paid for my rental up to two years because the Tubbs Fire was a Federally declared disaster. If it was just a run of the mill house fire, I would still be covered for 1 year. There was no monetary limit to my rental. Insurance covers an equivalent rental to my home.

So I was able to get a nice rental and not worry about the monthly rent. While insurance paid a lot for my rental, it still was not as much as one friend who had his home insurance pay $34K a month! On the other end is one of my friends, who had a maximum cap of $14,000 for her rental. That means that her insurance would only pay a total of $14,000 for the entire two years. Ouch.

First lesson of insurance – make sure you are well insured for not only dwelling and personal property, but also loss of use.This will make your housing situation much better after the loss of your home. Clarify how much coverage you have.

Related: What Is A Home Warranty And Do You Need One?

Silver Lining Of The Fire: Stronger Financial Situation

We have determined that being a owner versus a renter at the time of a disaster likely puts you in a better financial situation with insurance. But what insurance should home owners (and renters to some extent) obtain?

I personally am insured by a large, reputable insurance company who “is always on your side.” They went by the book and were quite helpful.

In fact, by the end of this process I owned my land out right, eliminated my mortgage, and increased my net worth by about $600,000. Granted, I had to replace all of my possessions, but that can be done deliberately and slowly.

Oh, but I don’t own a home anymore!

But still, a massive increase in net worth is quite the silver lining from this tragedy. Plus all the stress from owning a massive house with a massive mortgage is now gone.

What The Homeowner's Insurance Policy Covers

Insurance coverage is broken down into various coverages.

  • Dwelling: Coverage A: Dwelling
  • Other structures: Coverage B
  • Personal property: Coverage C 
  • Loss of use: Coverage D 
  • Personal liability: Coverage E 
  • Medical pay each person: Coverage F

The limits for these items are visible on the insurance policy declaration page. Please review each item thoroughly with the home insurance policy agent. If you don't understand something, you must have them explain it with some examples.

These are each important, but Coverage A is the most important.

Coverage A: Dwelling – Most Important Home Insurance Coverage

Coverage A dictates how much the insurance company pays for rebuilding a home. By law, if I rebuild they have to give me at least my Dwelling maximum to rebuild.

If you haven't updated your home insurance policy Coverage A in a while, I highly recommend it. Home values, like the stock market, tends to increase most years. After a while, your estimates on the cost to rebuild may be lowering the current market rates.


There are also extensions to this coverage. For instance, I had a 125% coverage extension. This means that the insurance company will pay an additional 25% of my maximum if I rebuild. This is an additional $200k for me to rebuild. I even realized after the fact that I could have purchased a “guaranteed replacement cost extension”.

If I had purchased a guaranteed replacement cost extension, then there would be no question about rebuilding as insurance would cover it all. There are three companies I know of that have guaranteed replacement cost: Chubb’s, Nationwide, and AIG. If insured with one of these insurers, it may be worth switching to guaranteed replacement cost.

The Homeowner's Insurance Payment

I thought my insurance company would pay out 100% coverage right off the bat, but unfortunately that was not the case. The insurance company came up with their own build estimate. From that estimate it depreciated the cost of things such as paint, roofs, flooring, etc.

It is not as bad as it sounds. For instance, in my case they depreciated about 1.5% of the home. Once I rebuilt, they paid the full amount.

Also remember that this initial payout is a starting/negotiation point. Initially, I received one big check from the insurance company. But I went back to negotiate for more given my builders estimated rebuilding costs higher than what the insurance company estimated.

Always negotiate!

Another important part of Coverage A is to be insured for “Replacement Cost.” Some insurances offer “Actual Cash Value.” Actual cash value only pays the depreciated cost of the home, meaning the insurance company will only pay for a 20-year-old roof and not the cost of a new roof. The difference in reconstruction costs will be covered by out of the owner’s pocket. Not so good if you ask me.

With a “replacement cost”policy, the insurance company may depreciate the home for the initial payout, but will pay that actual replacement cost once the item is built or purchased. This can lead to thousands of dollars when rebuilding.

Of course, there is no free lunch. Replacement cost value home insurance is more expensive than actual cash value home insurance. When disaster strikes, a homeowner will prefer the more expensive replacement cost value home insurance policy because there will be no depreciation adjustment. The homeowner gets everything replaced at today's prices.

Coverage B: Other Structures

Another reason the price point of Coverage A is important is because all of other Coverage limits are set by the Coverage A limit.

For instance, I am covered for Other Structures via Coverage B. This includes patios, external fireplaces, fences, and the outdoor kitchen.

The maximum insurance will pay me for Other Structures is 10% of my Coverage A. So if I have a $1,000,000 Coverage A limit, I get $100,000 for Other Structures. If my Coverage A limit is $500,000, then I only get $50,000 for Coverage B.

Coverage C: Personal Property

Coverage C or Personal Property coverage is the amount given for all of the items lost. T-shirts, speakers, kitchen appliances, furniture,…all that stuff we accumulate over a life time.

Another way to think of it is that if I took my home and turned it upside down, anything that falls out is paid for by Coverage C. Basically everything that comes out of your home.

Getting the insurance company to pay Coverage C can be a bit painful. While they paid a portion of the money up front, I had to itemize everything in my home to receive full payment – from underwear to Q-tips. Rugs, couches, and stuffed animals.

We spent approximately 75 to 100 hours to itemize every single item!

Carefully record all your belongings before a fire

This was probably the most painful part of the process. We had lost our home and now had to revisit each item again for the insurance company. This was accompanied by a three-hour recorded interview. Brutal.

Please take pictures and itemize all your belongings in a spreadsheet before you need to. 

The insurance company will take the list and depreciate it based on age and condition. They will pay out the depreciated cost. Again make sure you are insured for “Replacement Cost” and not “Actual Cash Value”. If you have “Replacement cost” coverage you can submit receipts as you buy items for the insurance company to pay the difference.

Side note: to be able to claim casualty losses in my 2017 taxes, I had to itemize. For the IRS I can deduct the difference between my depreciated value of items and what insurance paid me for these items. Unfortunately with the 2018 tax overhaul I believe this deduction went away.

Once again, Coverage A (Dwelling) limit dictates the Coverage C limit. For us it was 60% of our Coverage A limit and I think that is fairly standard.

Other Home Coverages

There are also other coverages that come with good insurance. We had coverage for Debris Removal (10% of Coverage A), Landscaping (5% of Coverage A), and Building Code Upgrade (20% of Coverage A).

There is also coverage for Personal Liability (Coverage E) and Medical Pay for Each Person (Coverage F), and these limits can be adjusted as needed.

Home insurance add ons
Source: YoungAlfred.com

Home Insurance Cost And Deductible

My insurance cost approximately $1,300 annually with a $1,500 deductible. Very affordable.

After this experience I would happily pay $2,000 annually for a higher coverage amount. Nothing is worse then being underinsured after losing a home. Home insurance has by far been the best return on investment I have ever made.

Here is an example of detailed home insurance policy quote comparisons for a $1,000,000 home. You can click the chart to shop around for home insurance with Policygenius.

Sample home insurance quote comparisons
Sample home insurance quote comparisons

For those of you living in even more expensive cities, here is another home insurance policy quote for a home valued at $5 million. Please beware that some larger insurance companies are not offering new home insurance policies because they have concentration risk. Hence, you will have to shop around.

home insurance policy quote for a $5 million home

What About Fire Coverage In A Home Insurance Policy?

Finally it is worth noting that I did not have additional fire insurance. I had my regular old home insurance and it covered all of the loss. This is not like an earthquake or flood that needs an additionally purchased insurance policy.

My policy covered the fire whether it was a natural disaster or a house fire. Some of the additional protections I received were due to this being a Federally declared disaster and living in a consumer protection state like California.

But no, I did not need fire insurance.

This is good, because I would never have thought to ask separately for it. In fact, when I went to bed at 1 AM I saw a red glow over the hill and did not even realize it was a fire!

When applying for a homeowners insurance policy always ask if the policy has a fire exclusion or not. If there is no fire exclusion, you're covered. 

Unfortunately, if the policy has a fire exclusion the insurance carrier will not cover damages from fires. You'll have to get a separate policy specifically for fires.

Total Destruction From A Fire May Be Best, Ironically

If there is going to be a fire though, in many ways it is best to have a complete loss like we did. Total destruction so that the insurance company can not argue about what is salvageable.

My neighbor was not so lucky. His home was still standing between two burnt homes. He had a lot of smoke damage and his house was uninhabitable.

He ended up fighting tooth and nail with the insurance company about his coverage. The insurance company argued everything should be cleaned first. He had two young kids and argued that his home needed to be stripped to the studs.

It was brutal to hear his stories of the back and forth discussions he was having. It was not a fight I wanted to have. He lost everything, but because his home was still standing receives much less support.

I was able to move forward while he remained stuck for months arguing with his insurance company.

house burns down after fire - What's In A Home Insurance Policy: Know The Details Before Your House Burns Down
home after tubbs fire - what does a homeowner's insurance policy cover in case of fire
Our home after the fire

Home Insurance Is A Life Saver

It pays to be well insured. I did not know much about property insurance when I bought my home. In fact, my insurance broker set this policy up for me and has been working with me throughout the claims process. I never even read the entire policy before this. I was by no means an expert, but now have a lot of first hand experience.

This is what I recommend for all homeowners:

  1. Call the insurance company and ask for a copy of the full policy. This document should be 50 to 70 pages long.
  2. Make sure to have an adequate Coverage A (Dwelling) limit. This is the coverage that will dictate all of the other coverages. It should be high enough to cover rebuilding a equivalent home. Make sure the coverage amount is up to date with the current value of your home and latest construction costs.
  3. Purchase “Replacement Cost” insurance and not “Actual Cash Value” for both Coverage A (Dwelling) and Coverage C (Personal Property).
  4. Consider an extension for the Coverage A limit or ask if there is one. My extension was for 125%, but other’s have 150%, 175%, or even guaranteed replacement cost. It is worth the small increase in annual cost if ever needed.
  5. Jump through the hoops that the insurance company lays out. I am impressed by my insurance company thus far. As long as I am doing what they ask, they have been quick and reasonable with payments.
  6. Photograph and video all personal items and keep the list in a shared spreadsheet.
  7. Ask if your home insurance policy covers fire insurance or has a fire exclusion. If it has a fire exclusion, then you best shop around for a new policy or add a fire insurance policy.

It Pays To Be Insured And Thorough

There you have it. One man’s experience with insurance after a major fire. May you never go through what I did. But if you do survive and have a good insurance policy, you might end up more appreciative of life and wealthier as a result.

If you're looking for a home insurance policy, check out Policygenius, the one stop marketplace for home insurance and other insurance needs. Instead of apply to individual insurance carriers one-by-one, apply for a home insurance policy on PolicyGenius and get multiple insurance offers. Then choose the best one that's right for you.

You should also check Policygenius to get customized life insurance quotes all in one place. Both my wife and I got matching 20-year term policies through Policygenius during the pandemic and feel a tremendous sense of relief as a result. If you have dependents and debt, getting a term life insurance policy is the responsible thing to do.

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About The Author

56 thoughts on “What’s In A Home Insurance Policy? Know The Details Before A Fire Occurs”

  1. I own my home, and obviously the plot of land the home is on. One option I have thought about if my home were destroyed from fire, earthquake, etc, would be to purchase a modular home. I live in a region of California where the cost of construction of a traditional home is very high. My house is a small Carmek cottage type home built in 1935. That way I can keep my home owners insurance costs in a reasonable range by not going the traditional build route. Nothing fancy for me.

  2. That picture of EJ standing in front of his house is crazy. Glad everything worked out for him though.

    Also, brb so I can I open up my home insurance policy and review the details…

  3. California Expat

    Great post, super helpful and informative.
    In South Florida the cost of home insurance, and the increased cost of construction, have created a real cost/benefit decision that needs to be made about how much insurance is worth to buy. For example, instead of the $2,000 per year for insurance mentioned in the post, the insurance for a similar sized home here is $8k-$16k annually, depending on how much Coverage A you want. Note though that the $8k option almost surely will provide a Coverage A amount that’s less than actual replacement cost to rebuild.

    1. I have definitely been hearing more about the rising cost to insure homes in Florida. $8000 to 16,000 a year annually is a lot! Buyers need to be aware of insurance cost before they buy a home.

      1. My FL house and car ins has tripled in two years. I’ve decided that if it doubles again, I’m outta here. Luckily, this doesn’t have to be my primary residence but I feel bad for people who have no where else to go.

  4. Hi Sam, this is Chris. I want to thank you and EJ for this valuable article. I learned some things.

  5. I am grateful to have signed up for your newsletter Financial Samurai, because reading just this last one about the Lahaina disaster and homeowners insurance coverage has opened my eyes on just how important it is. What an OMG moment and tragedy in Lahaina and other parts of beautiful Hawaii. Just goes to show, you never know right?! I’m not going to skimp on my future insurance needs. Insurance is a necessary evil, because you never know. Better to have peace of mind than having nothing when, this kind or other kinds of disaster hits home. God take care. Thank you Financial Samurai!

    1. Thank you for your donation! Got your e-mail and will send out a signed hard copy this week.

      Yes, disasters can occur at any time without a moments notice. We must help where we can.

      Thank you!

  6. Thanks for posting this. It’s devastating what happened in Maui and the Tubbs fire. I remember that distinctly.

    Insurance is one of those things most of us dread to do and think about. But man it can really be life and wallet saving. Thanks for the motivation to review our policies!

  7. Sam, thanks for the donation info. While I’m not a fan of the national untied way, after reading about the Maui one, I’m impressed.

  8. It was helpful when you said to ask for a copy of the full policy from the insurance company. My sister and her husband are planning on moving into their very first home in a couple of weeks, and they want to make sure that they do everything right when searching for homeowners insurance to get for it. I’ll make sure to pass these tips along to them once they start searching for companies to get homeowners insurance from.

  9. Rachael Harper

    There are a number of issues and/or accidents that could go wrong on your property and land you into financial trouble. Having the proper home insurance policies in place will make all the difference when it comes time to handle an unexpected issue.

    I just read this article, I know it’s been a few years back but your story proves a lot about how important it is to purchase and choose the right home insurance policy.
    Thanks for sharing this.

  10. Ellie Davis

    It’s interesting to know that coverage C is the amount that represents all of the items lost in a homeowner’s insurance policy. My brother bought his house recently, and a friend recommended to get homeowner’s insurance to protect his house. I will let him know about your article to help him understand what is homeowner’s insurance.

  11. Rolzan Norton

    Thanks for this post. Public adjusters are prohibited from charging more than 20 percent of the insurance claims payment on non-hurricane claims and 10 percent of the insurance claims payment on hurricane claims for claims made during the first year after the declaration of the emergency.

  12. Nellie Hodge

    I have Nationwide Insurance. We had a July 5, 2018. We had great coverage according to our ajuster. Our home is still sitting after a year July 5, 2019 .. coming soon. Our ALE expires July 5, 2019. Nationwide has wasted our policy money & now we are having to rent an apartment plus make a mortage payment.

  13. I’m sorry for the loss, and, am glad that you are able to recover well. This is an eye opener post, and I’m going to share your post with my friends to make sure they review their home insurance as well. However, I’m curious to understand on how the mortgage is waived off after the fire accident. I’ve been expecting that after the fire incident, your insurance company will payout to rebuild the house (the construction cost is generally much cheaper than the land value, at least in SF bay area), but the mortgage keeps going on. I don’t know what I’m missing to understand to become wealthier after the fire accident.

  14. insurance_claims_pro

    Well done! I’ve been in catastrophe claims for one of the big three for 10 years and I think you explained policies very well. It’s paramount to know what your policy covers. Most people are under the assumption insurance covers everything. Well, if that were true most people would be unable to afford it.

    It’s best to self insure, if you can, after that you definitely want to make sure your policy will cover not the value of your home but the cost to rebuild.

    I always recommend water back-up, flood, mold, and buying personal property endorsements for anything you have invested time or money collecting whether it’s firearms, jewelry, art, or any other specialty item(s).

    Lastly, insurance is for catastrophic damages. It’s not a maintenance policy. Policies cover sudden and accidental damages. They exclude all other types (wear & tear, seepage, workmanship etc.) Too many claims within 5 years and you are sure to see premium increases.

    1. Dads Dollars Debts

      Thanks for the support and good recommendations. Home owners warranty can cover wear and tear aspect, not home insurance.

  15. I had not heard about home liability covering you if you have an auto accident and they are seeking home as part of your wealth. Interesting. Typically also if your spouse is on the title of the home, some portion is protected from liability.

    Glad you made out okay. If building, I would go through proper permitting channels. No need to stress life even more with uncertainty.

  16. It was sad to see whole neighborhood go up in smoke and so quickly, thank God you and your family came out ok.

    Two days after the Santa Rosa fire, I went out immediately to get insurance. Was without for 5 years thank God nothing happened . As my neighbors has big trees the huge wind on the night of the fire scared me that the whole house can burn down in an instant.

    I always thought AAA rate was on the high side and didn’t use them for auto but surprisingly their homeowner rate is very competitive. My quote was $742 annually for $382k dewelling, additional 50% extended replacement, building code upgrade, 10% other structure, 50% personal property, $152k loss of use and $500k liability. I chose $5000 deductible because i only use the policy as a last resort. So if your premium is high, maybe it pays to go to AAA to get a quote.

    The agent told me unlike other insurance companies which may not pay out if there is work without permit such as an in-law setup, AAA would still cover it. She also said personal liability would kick in if an injured party from an auto accident sues me for the house equity. I always thought personal liability is only for slip and fall or something that happens on the premise.

    I don’t know if what she said is true or not, any thoughts on these two points ? thank you

  17. Renters insurance is important if you aren’t yet a homeowner. In 2013 there was a fire in my apartment building. I had water damage, and insurance helped replace my items, and pay for extended stay while I looked for a new place. The apartment complex was responsible for the building.
    Insurance is one one those best ti have it and not need it, but make sure your policy has what you need when the time comes.
    Great post!

  18. Thanks for sharing your story EJ. Now I will make sure to read my policy very carefully when I get home tonight.

    My neighbor(literally across the street from my house) had a fire last year and was completely burned down. We believe the kids fell asleep while smoking. Anyway, since witnessing that fire, I’ve been very edgy to the point where I bought plenty of fire extinguishers and it’s now all over the house and all the fire alarms are working.

    1. I had bought a fire ladder to be able to climb down from my son’s room the month before. So I understand. You should request the full policy from the company. It is 80 plus pages typically and will be emailed or mailed to you.

  19. Thanks for your story it’s very important to have enough coverage when disaster strikes!

    My own dilemma is specific to my 2 bed/3 bath condo in northern NJ. It has a value of 475 K on the market now but I struggle to determine what the replacement costs (dwelling) coverage I need in case of fire and needed to rebuild. I have a 105 K dwelling coverage and 55 K in personal property. I always question myself whether its enough….

    Anyone here have a condo in the Northeast and whats your basic policy coverages? I may call up my insurer today and get some more coverage…

    Thanks for help everyone!

    1. Unfortunately I have no info on the Northeast but I would suggest talking to the HOA. Particularly being in a condo I suspect there are some rules and recommendations on insurance.

  20. I just took out my Homeowners Renewal Policy and reviewed it because of your post. I think I’m adequately covered with “Extended Replacement Cost Coverage” although my next move might be to videotape all my belongings just in case I have to fight the insurance company for payment.

    Insurance to many is a boring subject but not so boring when a catastrophe happens and you really need it! Thanks for outlining how Coverage A Dwelling dictates the other coverage areas — I didn’t know that.

    1. Glad to hear you reviewed your policy. it is important to know what is on it. in general I think people are better at reviewing auto policies.

      The other coverages was unknown to me too but is a substantial amount of money.

  21. Agree on the post. Sorry about your house but ummmm….congratulations? You sound a bit okay with it.

    From the perspective of someone with a house on two coasts:
    The above about cover it except earthquake insurance. Last quote I got was depreciated cost with a deductible that was HUGE and there’s really not any options, it’s all the same. The option is hope for the best or take on a huge expense (about equal to your basic homeowners monthly) for a rare event.
    If my house out there burns down I’d actually come out ahead like you..unless there’s an earthquake then it burns down.

    From elsewhere in the US hurricane riders are key. And are delayed in onset. Had a bunch of friends scrambling to get it without realizing that there’s a 6 month to effect clause. No use getting it when they see the storm on radar.
    Flood insurance is huge! Even if you’re not in a “flood zone”. Look very carefully at what the flood zones mean. We don’t “need” flood insurance because we’re not in a flood zone but the estimate is one major flood every 10 years for our zone…how hat makes sense I have no idea. And the premium is minimal. If my house floods once every ten years you can believe i’ll come out better with flood insurance. I’m not in any position to argue with their predicted flood frequency so I just have to take their word for it. If you work for the Weather service YMMV.

    I feel you with the large house stress. Married? Must be. I bought the house my wife wanted and yes, I love it but right now working on getting the mortgage gone ASAP. And insured to the hilt.

    1. Dynx,
      I am okay with it, because that is life. You can plan for but not predict what the future will bring.

      Hurricane riders are important. I lived in New Orleans for years and had flood insurance despite not being in a flood zone (if that can exist there). It was not too expensive compared to earthquake insurance here in Cali. I will admit that I did not have earthquake insurance on my house that burned, and it was a mistake. It is good to be insured for the unexpected.

    2. I’m a Certified Floodplain Manager and work for the State Floodplain Management Office in Florida. I am very interested to know what flood zone you are located in, because even the HIGHEST flood zone is everything covered by the 1% Annual Chance flood (commonly referred to as the 100-year flood). 1 in 10 is ridiculously high chance!! Even in the Special Flood Hazard Area, it’s only about a 26% chance of flooding to the Base Flood Elevation over the course of a 30-year mortgage.

      1. Retired Agent

        I am a retired agent after forty-two years of owning an independent insurance agency. I have the most prominent insurance certification that I obtained by age twenty-nine. A flood every tens years is extremely high! The information that you provided is correct. People need to understand that you do not have to be in a flood plain to buy flood insurance. There are many flood incidents covered by flood insurance each year that are outside a flood plain. Also, there are private flood insurance carriers that write broader coverage than the coverage provided by the National Flood Insurance Program.

  22. Glad to hear you have had such a positive experience with your claims. I have heard horror stories with other people who have claims. Can you please share who your insurance is with?


    1. I haves used Allied, a subsidiary of Nationwide. They have been good, but people I know with AAA or Travelers insurance have had simpler times comparatively for obtaining their coverage A and coverage B max payments.

  23. Another great post EJ. I too read about your harrowing escape. You may be “richer” after the fire but what a hard way to do it. Congrats on the Financial Samurai guest post. You are doing well in the blogosphere. I hope to snag a good guest post after I do a few more posts on my new site.

  24. Great post DDD. One tip I’d add about contents coverage-there are certain items which have very limited coverage. Those are things you may need to schedule to fully cover-jewelry, art, and collectibles being the most common. Your policy likely has a very low limit on those kinds of items. So once you read the policy carefully, contact your insurance company if you need to schedule them.

    1. We thought we had the rider for my wife’s engagement ring and it turns out we did not. When we moved from New Orleans to California and purchased our new policy, we somehow forgot to include that rider. It was unfortunate that it was not there when we needed it. So great point Liz!

  25. Financial Orchid

    Well if u want to get real technical
    – Ensure that your wording is broad form based and not named perils
    – Earthquake premium in the bay is huge obviously
    – Consenting to a soft personal credit check can reduce your premium
    – ensuring you have sump pump can help reduce your overland water premium
    That means flood or sewer back up which are separate lines of cover to your building cover
    – mortgage loans require home insurance but even after your mortgage is paid off don’t cheap out on this
    – to understand the 70 page broad form wording it covers everything except what is excluded. So start reading on what is excluded
    – named peril coverage lists the only perils u are covered for
    – your home under 30 years with no claims should b on broad form which is better cover than named perils
    Msg me if u have any questions

  26. Thanks for the reminder . I just rechecked our coverage. The only low part is actual cost instead of replacement cost. Otherwise we’re well covered. I’ll have to consider asking for a change.

  27. Wow, thanks for this very informative post! It’s very timely since we hope to be closing on our first home in a week and I don’t fully understand what we should and shouldn’t have in our policy. We live near Seattle and are probably going to get earthquake insurance. So glad things are working out for you.

  28. This is a great article and I appreciate the guidance related to something that we all pay little to no attention to. I sent an email this morning to my insurance agent asking the questions that were outlined above. Thanks Sam.

  29. EJ’s story is very touching. I’m always surprised he’s so calm and collected! My post would be half: “waaaaaahhhh this stinkssss!”

    Natural disasters are always as at the back of my mind as well. Earthquake & fault lines news directed me towards (and away from the fault lines) in central and southern areas of Seattle. We’re up North but it’s still scary though. Who do you even get mad at except an act of God?

    1. It’s hard to get mad…It was never really the emotion. More shock and awe and then a survival mode. What do we need to do now, what are we missing, etc. Now we are almost 5 months out and some of the fatigue and emotional exhaustion has set in.

  30. I clearly remember reading the post on your blog about the fire with my jaw dropped open. It’s hard to even imagine what you’ve been through. I’m so glad to hear that you had an excellent insurance policy and that they haven’t causes you major difficulties loke your neighbor. Thanks for sharing so many really really good insights and tips on home insurance and your story. The pictures of your house before and after are hard to believe and thank goodness you all escaped safely!!!

  31. Hey EJ! I remember reading that story on your blog a while back it was harrowing! We currently have renter’s insurance, so I’ll need to take a look at it in case and take pictures of the things we own (so we can itemize one day if we need to). The rest of the stuff we own is probably on the amazon order history.

    Glad to hear at least that you can rebuild. Sending you some good thoughts from here :).

    1. We have a renters policy now (no longer home owners) and have made sure to insure for all of the things we bought. You can also look to see if there is a option to have a rental paid for if your place ever burns down. Not sure if there is but may be worth looking into. Thanks for sending the good thoughts.

  32. I’m sorry about the loss of your family home and wish you the best of luck with the rebuild. Thank you for this very clear and informative post. I live in Los Angeles, also vulnerable to natural disaster, and this is a good kick in the pants to take a hard look at our homeowner’s insurance and to reconsider earthquake insurance. I’m pretty sure we just bought the bare minimum homeowners policy when we purchased our house and that’s it completely inadequate.

    Maybe this is a separate post, but I’d be interested to hear more about the role of the insurance broker, both in setting up the policy and negotiating during the claims process.

    1. Thanks Frieda and yes, take a look at your insurance policy for sure.

      As for the broker/agent, they are very important in this process. I just went with what they recommended and it was pretty good coverage. Also, after the disaster they should be on your side. My broker has called my insurance company a few times but has not been as active as some may expect. If I asked them I am sure they would be more involved but I have been the one calling and dealing with the insurance adjustor.

  33. Wise Money Tips

    Just another reminder of the importance of proper homeowners insurance coverage. It is indeed generally a very good bargain for the coverage that you can get. It pays to insure what is likely the largest asset for many people. You just don’t know when disaster might strike.

    Homeowners in areas prone to flooding should also understand that typical policies may cover water damage from internal plumbing issues, etc. But they do not cover flood damage. For this type of protection, you need a separate flood insurance policy.

    1. I used to live in New Orleans and we had separate flood insurance. It was a big issue during Katrina that people were uninsured for flood damage. Insurance is by far the best deal you can get for the money.

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