We no longer have a fire season in Colorado. Wildfire is a year-round threat.
Already this year we have seen numerous wildfires, including the Lower North Fork fire in Jefferson County that killed three people and destroyed more than two-dozen homes.
It is critical that we modernize our insurance laws to fairly help homeowners who are devastated by such tragedies.
After the Four Mile Canyon fire that destroyed 169 homes in Boulder County in 2010, I met with residents who lost their homes. Many of them discovered after the fire that they did not have enough insurance to rebuild the home they lost. They thought their insurance was adequate because it roughly reflected the market value of their home, but more than half of those who lost their homes learned the hard way that the cost to rebuild far exceeded the market value.
People also had trouble getting insurance payments for the possessions they lost. Insurance companies required a detailed itemization of all the contents lost in a fire, even when the house and its contents were a total loss.
The insurance companies used sources such as eBay, Craigslist and online retailers to determine the cost to replace those items. Those sources often did not reflect the quality of the lost item. The amount the insurance companies offered frequently was not enough to replace the items.
Most insurance companies use a computer model to determine how much insurance to provide. The model determines the maximum amount of insurance the homeowner can purchase based on basic information about the size and features of a home. A homeowner may obtain an estimate of the cost to rebuild the home from a home builder. But the agent generally cannot use that estimate if it deviates significantly from the value the model computes. To override the model requires considerable effort by the agent.
Homeowners in the mountains need to be aware that the insurance they are relying on in the event of a fire does not account for high-country construction circumstances. The model that generates the policy amount does not account for the cost of building on steep, rocky terrain, added costs to deliver materials to remote locations; special building code requirements in certain jurisdictions; and other factors that drove up the cost of rebuilding in the mountains.
After hearing about these problems, I introduced legislation this year to require that the models and methodologies insurance companies use to write homeowner policies more closely reflect the cost of rebuilding where the home is located. The legislation also created a streamlined way to settle the value of the contents in the event of a complete loss. Deciding how much insurance to buy would have remained the homeowner's responsibility.
That legislation died in the House Local Government Committee.
Unless and until something is done, here are some reminders for Colorado homeowners:
∞ Review your insurance policy carefully.
∞ Don't confuse the market value or the assessed value of your home with the cost to rebuild. Rebuilding is likely to be far more expensive than buying a similar home. Get a builder to estimate the cost to build a similar home under current building codes. Then take the estimate to your insurance agent and advocate for the coverage you need.
• Document all the contents of your home and your outbuildings and keep that record up to date. If you have valuable jewelry, musical instruments, art or antiques, get them appraised and notify your insurance company. Make a video of your possessions and store the video off-site.
The pain of losing one's home and all its contents is bad enough. That pain should not be compounded by financial hardship when you cannot afford to rebuild and replace your possessions.
As the wildfire "season" gets under way, beware and be prepared.
State Rep. Claire Levy' s House District 13 includes western Boulder, Gilpin and Clear Creek counties. The district has been redrawn to include Grand County.