What if you lose your home in a disaster?

Will 2017 go down as the year of disasters? First, floods in southeast Texas, then Hurricanes in Florida, Puerto Rico and the Virgin Islands, a devastating earthquake in Mexico, and now the devastating wine country firestorms. And the year isn’t over yet.

We’re reeling from catastrophes, both natural and man-made. Some of us at Finet, we have friends and relatives who have lost everything in the Sonoma County fires. While we’re happy that they escaped injury, their lives will probably be in limbo for a long time.

Carey Richard, an independent insurance broker from Saratoga, reported one of her Napa clients lost his 4,800 square-foot estate to fire. “We’re talking a $5 to $6 million dollar loss,” she said.

So that raises the question “how do you rebuild, and what do you do in the meantime?” According to Richard, the first step is to find a safe place to stay, then phone your insurance agent to report your loss. “Most homeowners’ policies will provide money for temporary housing and incidental expenses,” Richard explained. “There are people who fled with nothing but their nightclothes. They’ll need clothes, shoes, food, a place to stay”. Some insurance companies are setting up temporary “command centers” to better serve their local customers.

For most, finding lodging won’t be easy. There was already a shortage of available rentals in many of the fire-struck areas, and some hotels and motels also burned.

Then, decisions need to be made: Do you want to rebuild, or do you want to abandon your old location and start fresh somewhere else? Your insurance company will likely offer a settlement if you want to walk away. But there are a lot of things to consider if you decide to rebuild.

-        Are you willing to wait over a year for your home to be rebuilt? After all, you’ll need architectural plans and building permits, and select a contractor (who may be backlogged for many months).

-        Do you want to return to a charred landscape that may take years before it starts to look “normal” again? What if the beautiful forest visible from your back yard is nothing but charred stumps?

-        What if your neighbors decide to not rebuild? Will your house be the only one in the development?

-        Will you have enough money to re-build with today’s building codes?

What if you have a mortgage on a house that no longer exists? You’re still on the hook. You must continue to make your payments until the loan is paid off. If you want to walk away and receive a settlement from your insurance company, the lender gets paid first. That’s because they’re listed as a “loss payee” on your policy. If there’s anything left, that goes to you.

And speaking of mortgages, if you’re a buying or refinancing a home with a conforming loan in a county that’s been declared a disaster area, your transaction will be on hold until the fires are 85% contained, even if your property is 50 miles away and completely out of danger. If your loan is a “jumbo”, you must wait for 100% containment.

We on the Peninsula and South Bay should not feel overly confident that a similar disaster could befall us. To better prepare for fire, I received the following advice:

From Gene Zambetti, Saratoga Fire District Commissioner:

1.    Make sure you have defensible space around your home. For homes west of Saratoga-Los Gatos and Saratoga-Sunnyvale Road, give yourself 100 feet. Cut overhanging branches.

2.   Have an evacuation plan for your family, and know everyone’s phone number .

3.   Know your neighbors. If any of them are disabled, they may need help getting out.

4.   You can help save your home by spraying your roof and walls with a garden hose – until you’re told to evacuate!

From Insurance broker Carey Richard:

1.   Take a picture of each room, each closet, and each drawer. That will help you take an inventory of what was lost.

2.   Review your fire insurance policy with your agent to make sure you’re adequately covered.

Just as with the floods in Texas and the Hurricanes in Florida, the initial event is only the beginning of the suffering. Many homeowners in the wine regions will discover that they don’t have adequate insurance coverage. If so, FEMA will probably help fill the void. There will be major losses, but because they will be spread amongst many insurance companies, it should not bankrupt any of them, according to my sources. With time, I fully expect the wine country to return to its former glory.

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