Home Insurance 101 After a Major Disaster
It’s one thing to handle minor home repairs, but rebuilding after a major natural disaster that devastates your street, neighborhood, or even the entire region is a different challenge. Don’t wait until you’re in a crisis to figure out what to expect. Understanding your home insurance benefits and rights following a widespread emergency is crucial.
An aerial photo shows the charred homes of Louise Hamlin, right, and Chris Wilson after the Eaton Fire in Altadena, Calif., Thursday, Jan. 30, 2025. (AP Photo/Jae C. Hong)
What Kind of Coverage Matters?
Insurance is meant to cover your losses, but the specifics can vary dramatically. The most important first step is checking your policy to see if you have “replacement cost value” coverage. This is the comprehensive standard, providing the funds to replace what you lost with new items if your home is impacted by a major disaster like a wildfire.
If your policy offers “actual cash value,” the dollar limits only cover the value of your loss factoring in depreciation at the time of the event.
Chris Wilson, right, and Louise Hamlin, two neighbors who lost their homes in the Eaton Fire, walk through the remains of their homes in Altadena, Calif., Thursday, Jan. 30, 2025. (AP Photo/Jae C. Hong)
Amy Bach of the consumer advocacy group United Policyholders explains the difference: “Actual cash value is the equivalent of a Craigslist price. It’s not the replacement cost price.”
Advanced Payments in the Initial Days
The immediate aftermath of an emergency is expensive. From finding a new place to live to buying essential clothes and toiletries, start by familiarizing yourself with any state laws regulating insurance companies regarding advanced payments.
California, for example, has strong consumer protections, requiring insurers to quickly pay out up to $250,000, or 30% of the policy’s dwelling coverage limit, when a state of emergency has been declared and the home is a total loss. This is an advanced payment; it doesn’t require the homeowner to itemize all destroyed belongings or wait for an adjuster to access the property.
If you can’t reach your insurer, check for emergency response centers in your community. These centers should provide state and federal troubleshooters to assist. They may also provide information on other aid, grants, and subsidies available in conjunction with or separate from your insurance benefits. Local businesses may also be present to offer free goods such as furniture or clothing.
Considering the Rebuilding Timeline
Expect to be displaced for months, possibly years, depending on the disaster’s scope. For major wildfires, cleaning up the toxic burned site can take as long as the whole new construction project.
During this time, you will likely continue to pay the mortgage on a property you cannot occupy. Property insurance generally refers to the cost of living while displaced as “loss of use” coverage, also known as “additional living expense” or “fair rental value.” Check this line item to determine if you would have enough to cover both your mortgage and a temporary rental.
