Insurance Coverage Advice After Marshall Fire

Right now, those of us at Leigh Suskin Farmers Insurance Agency in Cottonwood Square spend the majority of our time reviewing policies and making changes to ensure that our policyholders are prepared for and protected. As insurance agents, our job is to educate and provide advice. We are a resource for Niwotians regardless of which company you use.

Things have changed, and this is our new reality. The Marshall Fire was first reported at 10:30 a.m. on December 30, 2021, and by 11:00 p.m. it had consumed 1,100 homes. No longer are we safe from fire in subdivisions or in town. To date, Marshall Fire property claims for both structures and autos exceeds $2 billion. According to the Colorado Division of Insurance, only 8% of homeowners who lost homes had guaranteed replacement coverage. The other homes were underinsured by hundreds of thousands of dollars.

It is our hope that your take-away from this article is to reach out to your insurance agent or any trusted insurance agent to review your current policies as a significant way to prepare for a catastrophic event and maintain your peace of mind.

You should review your policy for three specific things: home and personal property, loss of use and building ordinance coverage.

Home and Personal Property:

You want Replacement Cost Value (RCV) coverage. This is the amount to repair or rebuild your home from the ground up at today’s building material cost and/or replace your belongings. This number is not to be confused with market value. This is traditionally calculated per square foot and is also what you want on personal property to receive the value to replace your items (the alternatives are Actual Cost Value or Scheduled).

There are two other coverages relevant to the on top of dwelling cost, Guaranteed Replacement Cost (GRC) and Extended Replacement Cost (ERC). GRC will cover the full rebuilding of your home regardless of the dollar amount. As the Colorado Division of Insurance reported with the Marshall Fire, 92% of homeowners did not have this coverage, and it would have protected them from being underinsured and from fluctuating material costs. The next best way to protect yourself is to opt for ERC. ERC will provide 125% or 150% of the dwelling replacement cost so that you have additional coverage if rebuilding costs exceed policy limits. 83% of Marshall Fire homeowners who lost their homes had some extended benefits.

Loss of Use:

This coverage is important–it addresses where you will live while your home is being repaired or rebuilt. Most companies have Loss of Use coverage, but you’ll want to be familiar with the details, as those vary by carrier. Loss of Use coverage should be determined by the overall face value of your home insurance (dwelling cost). If your home was valued at $500,000 to rebuild, then the loss of use amount should be 25-30% of that for up to two years. This provides the money necessary for you to live and thrive while rebuilding. Each carrier has different parameters for what type of lodging is provided. Take a look. Would you be staying in a home of similar size for your family? Or will you be in a hotel room?

Building Ordinance Coverage:

You may need extra money in your policy coverage to pay for bringing your home up to existing building codes. Homes being repaired require a local building permit along with inspections of completed work. You may need an extra 10% to 25% of your home’s insured value added to your coverage to make sure you have enough money to rebuild and meet all current building codes (i.e., the older the home, the more codes have changed).

Remember that outlays such as demolition permit fees, building permit fees, and inspection fees are usually some of the myriad expenses incurred with a total loss, so again, review your coverage with a state licensed insurance representative who can offer advice and answer questions.