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Fire Alarm: File Homeowners Insurance Claims as Soon as Possible After Disaster Hits

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By Amy Hoak, MarketWatch

RISMEDIA, Oct. 26, 2007-(MarketWatch)-Homeowners in Southern California had submitted more than 1,100 claims to Farmers Insurance Group of Companies as of late Tuesday afternoon, heeding the company’s request for policyholders with damage to call as soon as possible.

While claims often don’t need to be filed immediately after the damage has been done, the company is encouraging homeowners to file soon — “the sooner the better so we can get your life back to normal as quickly as possible,” said spokeswoman Michelle Levy.

It’s a lesson that even homeowners far removed from the wildfires in California might keep in mind for the future: In times of disaster, don’t wait to report home damage.

“Insurance companies understand you have to find a place to live and make sure family is safe and make sure they’re settled,” said Mike Barry, vice president of media relations for the Insurance Information Institute. But there can be a time limit on filing claims, and it’s important to call the insurance company as soon as you know there is damage, he added.

The typical homeowners policy will likely cover most losses related to fire and wind damage, Barry said. Often, the only time that fire damage is not covered is in cases of arson when the homeowner is responsible.

And it is likely that most of the homeowners affected by the Southern California fires are insured, said Patrick Long, an Orange County-based attorney who focuses on disaster-related claims. That’s because the fires, he said, “are to a certain extent focused on the more well-to-do areas.” He estimated that at least 90% of affected homeowners are covered.

But damage could be far from over. The forecast is calling for conditions that could cause the fire to spread, according to Neena Saith, catastrophe response analyst at Risk Management Solutions, a firm that specializes in the quantification and management of catastrophe risks.

“The Southern California wildfires continue to spread rapidly under the influence of the powerful Santa Ana winds. The weather conditions forecasted for the next 24 hours remain conducive to explosive fire spread, so the damage could be very severe unless the fires are quickly contained,” Saith said in a written statement released Tuesday morning.

At that time, more than 900 properties were destroyed and more were threatened, she said. While the fire in San Diego County has caused the most destruction so far, insurers were keeping a close eye on the fires threatening properties in Malibu, worth millions of dollars, she added.

Filing a claim

When calling the insurer, find out what that time limit is to make a claim, and ask to what extent your losses will be covered, Barry said. If it’s a situation where minor damage has occurred, find out if the claim will exceed the deductible, he added.

Also, for those who have evacuated, policies often have coverage for reimbursement of living expenses after the home is left; find out if yours does, and keep the receipts of those expenses.

If possible, Long recommends homeowners grab their insurance policy and related documents before evacuating in order to easily communicate with the insurer. And keep careful and detailed records on the various losses you’ve suffered, he added.

Of course, not everyone who has evacuated will know just yet whether they’ve suffered damage to their homes, as he pointed out. But as soon as you know you’ve suffered a loss, contact the insurance carrier to let them know.

“They’re going to be inundated with calls,” he said of the insurance companies, but the sooner those claims can be made, the better.

Lessons learned

For those not affected by the disaster, this is a “teachable moment,” said Harvey Ryland, president and CEO of the Institute for Business & Home Safety.

“What we find is that in general, people are in denial … they tend to deny that they’re at risk,” Ryland said. But there are efforts that can be made in order to minimize financial loss from a natural disaster such as this one, he added.

Regardless of the region in which you live, it’s important to know what natural disasters could affect the area and have adequate insurance protection, Barry said.

The California Society of CPAs advises people to buy, at a minimum, full replacement or replacement cost coverage. Also check if the policy covers building-code changes, and look for a policy that covers the replacement cost of your possessions — not only the actual cash value of them, the group said.

Once a year, conduct a household inventory to document the value of your possessions, said Anna Maria Galdieri, a certified public accountant in Oakland, Calif., who has been working with disaster victims since 1991. She recommends videotaping a home’s interior, including the insides of the closets. Keep the documentation in a safe place, away from home, such as a safe deposit box at a bank — away from disaster prone areas, the California group advises.

For those who live in areas where fires are an issue, a noncombustible roof is probably the single most important preventive measure to take to limit the damage, followed by noncombustible siding on the house, Ryland said.

It’s also wise to have defensible space around the home-that is, minimize the plants around the home that can ignite and transfer fire to the structure, he said. Other measures include making sure that the gutters are clear of leaves-one firebrand that falls in a gutter full of them can be disastrous, he added.

That said, while homes can be made fire resistant, they’re never declared fireproof.

Even Ryland, an expert on the topic, had his Santa Barbara, Calif., home destroyed in 1978, when embers blew through the screen wire in the soffits under the eaves of his home.

It’s possible that cautious homeowners in Southern California today could face a similar fate — no matter how many precautions they took, Barry said.

“It may well come out that these people took these steps, and they’re still out of luck.”

Amy Hoak is a MarketWatch reporter based in Chicago.

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