[Tens of thousands of California residents are faced with the daunting decision of whether to permanently relocate or rebuild their homes after the most destructive fires in Los Angeles’ history. Insurance companies may cover thousands of dollars in temporary housing and living expenses, but only for those who are fully insured. For those who are underinsured or not covered, the burden of financial responsibility falls on the homeowner.
According to Karen Collins, vice president of the American Property Casualty Insurance Association’s property and environmental division, insurance policies generally cover the cost of additional living expenses while the homeowner is out of their home, up to a certain percentage of the policy’s total value. For example, if a policy covers $100,000 for a property, the insurance company might cover another $20,000 in additional living expenses.
However, for those who are not fully insured, the decision to move or rebuild becomes a financial and emotional burden. Peter Vanek, president of PVRK, a Southern California-based real estate consulting company, knows firsthand the importance of having adequate insurance coverage. His home was destroyed by a battery fire in 2023 and his insurance company initially estimated the damage at $350,000. After providing evidence of what was lost, the insurance company paid twice as much, including living expenses while he relocated and the house was rebuilt.
Leave or build again? Insurance coverage plays an outsized role in the decision to move or invest resources into reconstruction. For some with insurance, it could boil down to having pictures of the property before the damages and updating insurers with home estimates. However, for those who are underinsured or not covered, the financial strain of rebuilding or relocating may be too great to bear.
The current wildfires in Los Angeles County are the costliest and most destructive in its history, with insured losses potentially exceeding $20 billion, according to a report by JPMorgan Chase. As homeowners grapple with the difficult decision of whether to stay or go, insurance coverage will play a critical role in determining their financial and emotional future.
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