As hints of fall weather begin, California residents remain mindful that the risks from Diablo and Santa Ana wind-driven wildfires are still to come. Unfortunately, with California’s riskiest months still approaching, consumers in 2021 must also be aware of a new threat in wildfire planning.
Across the country, a significant shortage of labor and construction materials, particularly lumber, and supply chain issues have sent building costs through the roof, which is increasing costs for consumers and delaying home repairs.
The price of lumber skyrocketed by a whopping 400 percent to $1,600 per thousand board feet in May, up from $400 early last year.
According to a recent white paper by the American Property Casualty Insurance Association, supply and demand issues will likely be exacerbated as new wildfires erupt and cause more widespread damage, leading to higher costs and longer reconstruction timeframes. Under these conditions, after a wildfire, homeowners and business owners may find they also do not have enough insurance coverage to rebuild.
The demand for skilled contractors and construction materials to build new homes and complete home remodeling projects during the pandemic collided with the end of a record-breaking year for severe storm and wildfire losses in 2020.
Materials and labor supply simply could not keep up with the increased demand. As an example, the price of lumber skyrocketed by a whopping 400 percent to $1,600 per thousand board feet in May, up from $400 early last year.
California’s already active 2021 wildfire season could further strain the imbalance between supply and demand and leave homeowners and renters with a more challenging and longer recovery. It is September, and California’s 2021 wildfires to-date have far exceeded the number of all fires in 2020.
Use your smart phone to video each room of your home. No one care remember everything they have after a total loss.
The recent wind-driven Caldor and Dixie Fires forced thousands of evacuations, destroyed several rural towns, and nearly devastated South Lake Tahoe. Insurers are in impacted communities working to help those who have been devastated.
Those who are out of harm’s way for now should review their policies before more embers start to fly. Talk to your insurer to make sure you have the right amount and right types of coverage. This is critical any year, but especially during these unique market conditions.
For starters, check to see if your policy includes important features such as coverage for building code upgrades, annual inflation adjustment, and extended replacement cost, which increases the coverage available to rebuild your home when labor and materials costs skyrocket after a natural disaster.
Additionally, check if your policy includes optional higher limits of additional living expense coverage, which helps cover a new place to live costs if a longer timeframe is needed to rebuild your home. Finally, use your smart phone to video each room of your home. No one care remember everything they have after a total loss.
Also, consider your need for flood insurance. In the aftermath of a wildfire, homes located downslope are at increased risk of flooding and landslides. Flood damage is not covered under a standard homeowners insurance policy, but coverage is available as a separate policy through the National Flood Insurance Program or the private market.
Insurers are also encouraging homeowners, renters, and business owners to mitigate their property’s risk, which could help bend the loss curve and ease pressure on costs. Steps like removing combustible material within 5-feet of your home, removing debris from roofs and gutters, sealing the garage door, also don’t stack wood or debris near the home, deck, or fence and replace vent screens with 1/8-inch mesh screens.
Wildfire preparedness is a community effort. Talk to your neighbors and get them involved in preparedness because their risk is your risk.
With more wildfires unfortunately on the horizon and rebuilding costs not expected to return to normal anytime soon, these actions and additional policy features may provide significant value and added financial protection if supply and demand issues complicate and delay wildfire recovery and rebuilding efforts.
Editor’s Note: David A. Sampson is the president and CEO of the American Property Casualty Insurance Association.