Navigating Wildfire Insurance Claims: What Every Survivor Needs to Know
Published Date: 01/22/2025
When wildfires devastate California, survivors face not only the loss of their homes but also the complex, often confusing, task of navigating insurance claims. As the flames die down and evacuation orders lift, homeowners are left with tough decisions: should they rebuild on the same lot, or move elsewhere? To help survivors understand their options and insurance coverage, insurance expert Karl Susman joined NBC Bay Area for a segment breaking down the essential elements of the insurance claims process after a wildfire.
This post dives deep into what homeowners should know to make informed decisions and avoid common pitfalls in the aftermath of a wildfire.
1. The Aftermath: The Emotional and Financial Toll
Recovering from a wildfire isn’t just about rebuilding structures—it’s about rebuilding lives. Homeowners who lose everything must face emotional exhaustion and rapid decision-making while also navigating insurance complexities, construction delays, and financial strain.
According to Karen Collins from the American Property Casualty Insurance Association, “It typically takes a number of months—or even a couple of years—to secure permits, find contractors, and complete rebuilding.”
This timeline can surprise many survivors, who may expect a quicker recovery. The best insurance coverage can't overcome California's housing shortages, contractor backlogs, or permitting bureaucracy. Understanding your policy and options becomes crucial in managing the recovery process.
2. Rebuilding vs. Moving On: What Your Policy Actually Covers
After a wildfire, homeowners generally face two choices:
- Rebuild on the same lot
- Use insurance proceeds to buy or build elsewhere
Many homeowners instinctively want to “start fresh” in a safer area, but this decision has significant implications for insurance payouts. Karl Susman explains:
“As long as you are putting yourself back in a home, you should be getting the same type of recovery from your insurance company. But if you choose not to rebuild or repurchase, your payout could be reduced.”
Insurance policies typically follow the principle of indemnification—designed to return the homeowner to the same financial position they were in before the loss, rather than provide a windfall. This means if you sell the lot and don’t rebuild or repurchase a home, the payout may be based on Actual Cash Value (ACV), which is the depreciated amount, rather than the Full Replacement Cost. This difference can add up to tens of thousands of dollars or more.
3. Mortgage Matters: Why Your Lender Still Has a Say
Even after a total loss, mortgage lenders still play a role in the insurance payout process. The home serves as collateral for the loan, meaning the mortgage lender is listed as a payee on the insurance claim.
Susman explains:
“If you had a mortgage, you’re going to have to involve your bank. That’s not a brick wall—it’s just another step.”
Typically, the insurer’s check will be made payable to both you and the mortgage company, requiring dual endorsement. The lender must first ensure the debt obligations are satisfied before you can access the remaining funds. While this can delay rebuilding or relocation, it ensures that financial responsibilities are upheld.
4. Your Lot Still Has Value: Don’t Overlook Land Equity
Even though your home may be gone, your land still has value. Many homeowners overlook the fact that insurance covers the structure, not the land beneath it. In California, where land is scarce and buildable areas are in high demand, your lot can have significant market value.
When evaluating your recovery options, it’s important to factor in land equity. Selling the lot may reduce rebuilding costs or help fund relocation, but this decision will also affect your total claim strategy. Understanding your policy’s handling of replacement costs vs. relocation is essential before finalizing any plans.
5. The “Penalty” for Not Rebuilding: Why Insurers Encourage Reconstruction
Insurance policies are designed to replace the loss, not to provide a cash windfall. Susman emphasizes:
“Insurance policies are designed to put you back where you were—which is in a house, not with cash in the bank.”
If you choose not to rebuild or relocate, your insurance payout may be reduced. This is because insurers generally require the replacement of the home, not just a financial settlement. To avoid misunderstandings, it’s important to communicate your plans with your insurer.
For homeowners looking to buy elsewhere, insurers typically allow like-kind replacement (in a different city) if it’s within a reasonable timeframe and value range. If you plan to sell the lot or rebuild in another location, make sure to clarify your intentions with the adjuster to avoid a reduction in your payout.
6. How to Navigate the Claim Process Successfully
Filing a wildfire claim is an ongoing process, not a one-time event. Here are Karl Susman’s tips for managing the claim process effectively:
- Keep a Detailed Record: Document every conversation with your insurer, including names, titles, and promises. Use email whenever possible to create a digital paper trail.
- Photograph and Inventory Everything: Take photos or videos of all damage, including partial remains. For total losses, recreate an inventory of belongings from memory or receipts.
- Communicate Regularly: Stay proactive and check in weekly. Claims can stall due to missing forms or unclear documentation. Persistent follow-up helps keep your file active.
- Consult Professionals: Public adjusters, construction estimators, and consumer advocates can assist with reviewing estimates and negotiating fair settlements. Vet these professionals carefully, as scammers often target wildfire victims.
- Be Patient, But Proactive: Wildfire claims can take months or years to resolve. Stay engaged and track timelines for rebuilding, permitting, and fund disbursements. Patience and persistence will expedite the recovery process.
7. FEMA, SBA, and Other Assistance Programs
While insurance is the primary recovery resource, federal and state programs can fill gaps. The Federal Emergency Management Agency (FEMA) provides:
- Individual Assistance Grants for temporary housing, repairs, or personal property losses not covered by insurance.
- Disaster Loans through the Small Business Administration (SBA) for both homeowners and renters.
These programs supplement private insurance and can help homeowners recover more quickly. Ensure you apply early and provide documentation of your insurance claim to speed up the approval process.
8. Lessons for All Homeowners: Be Ready Before the Next Fire
Even if your home hasn’t been affected, wildfire preparedness is essential for every Californian homeowner. Susman’s proactive steps include:
- Review your policy annually: Ensure coverage limits reflect current construction costs, not just the market value of your home.
- Add extended replacement cost coverage: This provides a buffer (typically 25–50%) above your dwelling limit to account for post-disaster inflation.
- Consider ordinance or law coverage: This pays for code upgrades required when rebuilding.
- Store digital copies of your policy, receipts, and photos in a cloud-based location.
- Create a wildfire action plan: Include evacuation routes and an emergency fund to be prepared when disaster strikes.
Preparing today can prevent panic tomorrow.
9. The Takeaway: Clarity and Communication Are Key
Recovering from a wildfire isn’t just about rebuilding your home—it’s about rebuilding your life. Understanding what your insurance policy covers (and what it doesn’t) can make a significant difference in how smoothly the recovery process goes.
Karl Susman’s advice is simple but crucial:
“Talk with your insurance company about your options. Keep records of your calls, and keep track of who promises what—and when.”
In the uncertain months following a wildfire, that diligence and informed decision-making are your best assets. Only through persistence and communication will you rebuild your future—smartly, safely, and sustainably.
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