Take Time to Review Fire Insurance

With vivid images of the devastating wildfires that destroyed hundreds of Southland houses last week still fresh, this is a good time to review your existing homeowners insurance coverage.

Some of the victims of the fires are discovering that they are underinsured--or even worse, that they have no hazard insurance at all.

Insurers emphasize the importance of homeowners reviewing their insurance coverage at least once a year, according to Patricia Lombard, executive director of the Western Insurance Information Service.

While you’re required by your lender to have hazard insurance, adequate hazard coverage is just as important even if the house is paid for, because you’ll need insurance money to repair or replace it if the house is damaged by fire.

If your insurer offers it, you might consider obtaining an inflation-guard endorsement that automatically increases the amount of coverage annually under a homeowners policy as protection against inflation, she said. The charge varies with the company.

Insurance coverage for the house, its contents and the homeowner’s or tenant’s liability to others are most commonly combined into a single package called a homeowners policy.

The basic homeowners policy--called HO-1 in industrywide terminology--covers 11 specified perils, including fire, theft and vandalism. The broad-form policy--designated HO-2 by the insurance industry--covers these 11, plus six others. A renter’s policy (HO-4) is similar to the HO-2 and is for people who rent an apartment or own a cooperative unit.

An advantage of having a homeowners policy over separate polices for fire, theft and other perils is that a homeowners policy will pay any additional living expenses--over and above normal expenditures--should the policyholder be forced by fire or other cause to temporarily live elsewhere.

If, like many homeowners, you have personal property--furs, cameras, jewelry, art objects--that may be more valuable than the limits set under the personal property coverage of a homeowners or tenants policy, you might want to consider purchasing a personal articles “floater� as a separate policy or by endorsement to the homeowners policy, Lombard said.

Floater refers to the portable nature of the articles insured and the fact that coverage applies wherever the articles are located at the time of the loss, she said.

To receive full replacement payment for any partial loss or damage under a homeowners policy, Lombard said, the owner must insure the dwelling for at least 80% of its replacement value. To receive replacement for a total loss, you must insure for the full value of the structure or buy a replacement-cost policy.

“The market value of a house in most cases is not a good basis for determining how much coverage to buy,� Lombard said. “Meet with your insurance agent--or a customer service representative in the case of a direct-writing company--to determine what the replacement value is. It’s important to remember that the building lot represents a great deal of the home’s value and it will not be destroyed by a fire.’

Another reason that it is important to have sufficient insurance is that the amount of coverage on the house becomes the basis for determining what percentages of the coverage are automatically assigned to other structures on the property, for personal property and for additional living expenses.

Under most homeowner policies, detached garages and other outbuildings are covered for 10% of the amount of the coverage on the house; personal property for 50% and additional living expenses for 20%, Lombard said. Additional living expenses are limited to 10% of the amount of coverage under the HO-1 and HO-8 (older home policy).

To collect for personal property destroyed in a fire, you’ll have to provide your company’s claims adjuster with a record of all belongings. Western Insurance Information Service offers a free brochure entitled ‘Taking Inventory.� Available from the nonprofit, non-lobbying group that serves 10 Western states, the brochure is a room-by-room checklist with space to record the serial numbers of television sets, VCRs and stereos, as well as a listing of other property such as furniture and appliances.

For a free copy of “Taking Inventory,� write to Western Insurance Information Service at 3530 Wilshire Blvd., Suite 1610, Los Angeles, Calif. 90010. Please send a self-address stamped envelope. The toll-free telephone number is (800) 397-1679).

Besides completing the inventory and putting it in a safe place, the service recommends:

--Keeping the sales receipts of all personal property you buy. Having the sales receipts will help the adjuster determine the value of your damaged or destroyed property.

--Take color photos of your property or, if you have a camcorder, make videotapes of it. Open up the closets and photograph or videotape the clothing; go into your kitchen and make a photographic record of the pots and pans.

--Engrave your property with a driver’s license number. You can buy an electric engraving device from a well-stocked hardware store. Engraving your property makes it easier for police to identify it if it is recovered after a theft. Be sure to record the numbers in your inventory booklet or other form.

--Keep all these records in a bank safe deposit box or a desk or locker at work. They won’t do you any good if they’re destroyed in the fire.