The challenges facing homeowners in areas of high risk for wildfires
For many homeowners in the western part of the country, the threat of wildfire is an ever present risk. Heat, drought, lightning and wind create the perfect conditions to spark a blaze that can threaten homes, destroy property and in extreme cases, consume tens of thousands of acres.
Ian Hanson, Personal Insurance Manager at the Burns & Wilcox San Francisco office, explains that without the proper coverage, homeowners may be responsible for significant repair and replacement costs following a wildfire. “Brokers and agents need to work with their clients in high-risk regions to ensure they have adequate limits for their dwelling, detached structures, contents and additional living expenses in the event of a total loss,” says Hanson. “It is also important to perform occasional reviews of an insured’s homeowners limits as the cost to replace their structures and valuables can drastically change over time.”
Bill Gatewood, Director, Personal Insurance, Burns & Wilcox agrees and notes that coverage is becoming more difficult to place for properties located in high-risk regions. According to Gatewood and Hanson, standard market carriers have been hesitant to insure homes located in areas prone to wildfires.
There are a number of things brokers and agents can do to help their clients navigate the challenges of securing coverage. These include:
1. Consider Surplus Lines Policies
Brokers and agents often think a surplus lines policy will offer substandard coverages and claims service. However in many cases, surplus lines policies can actually meet or exceed the coverage offered by a standard carrier. Brokers should feel confident when contacting a wholesaler to place coverage with a surplus lines market as those policies provide clients a viable option for hard-to-place exposures.
Environmental issues can have an adverse effect on the insurance market prompting large carriers to change their appetite for writing difficult exposures in catastrophe exposure areas. This has a ripple effect as smaller companies typically follow suit. For example, the increased risk of wildfire caused by the California drought has prompted carriers to re-examine the FireLine score in areas they are writing to determine whether they want to offer coverage. Brokers should stay up-to-date with current environmental trends to ensure their clients are able to get the coverage they need.
3. Landscape requirements
Homeowners can help decrease their risk of wildfire damage by clearing brush away from their property. Local fire departments often require homeowners take this action in high-risk areas. However, homeowners should be aware that standards approved by a fire department may not be the same ones used by an insurance carrier. According to Gatewood, this is a common challenge. Brokers and agents can better assist their clients by confirming not only the local fire department requirements, but also those of insurance carriers.
4. Protection Class
The presence and accessibility to water will affect the likelihood of fire damage. If there is no public hydrant within 1,000 feet, the insurance carrier may require the home has an onsite source – such as a pool or water tank – or that adequate water can be brought from a fire station. Brokers and agents need to take the accessibility to water into consideration as it can have a significant effect on whether a carrier will accept or decline the risk and at what rate they will do so.
5. Insure to Value
Wildfire damage generally causes a “total loss” for homeowners and if insurance limits are not consistent with the home’s true replacement cost, which differs from the homes market value, homeowners can be left having to pay out of pocket. Brokers and agents should work with homeowners to determine the cost to replace all assets. Brokers and agents should also be inspecting their clients’ brush exposed homes every few years to ensure policies continue to reflect the full value.
Without the right limits and coverages, homeowners can be left to manage steep repair and replacement costs out of pocket. Understanding the risks associated with wildfires is essential to securing proper coverage. After all, a single blaze can destroy a home.
 The FireLine provides an overall wildfire hazard score for each property based on individual risk factors of fuel, slope, and road access.