BiggerPockets Money Podcast - Protecting Your Home (and Wealth!) When a Natural Disaster Strikes w/ Steve Longenecker (Bonus Episode)

Episode Date: January 12, 2022

Home insurance isn’t the sexiest topic, but in the world of financial independence, predictability is quite an attractive trait to have. That’s why money nerds across the world value insurance as a natural hedge against catastrophic wealth-ending disasters. Whether you’re a homeowner, a renter, or a landlord, home insurance could help you rebuild quicker after the unexpected happens. Recently, a large fire broke out around the Denver, Colorado area, affecting families in Mindy’s home city of Longmont. Thankfully, Mindy and her family are safe, but many didn’t share the same fate. Hundreds of households were left without homes, while they watched their old neighborhoods turn to ashes and embers. This prompted Mindy to invite her good friend and insurance expert, Steve Longenecker, onto the show to discuss how you can financially protect your family when disaster strikes. Are you underinsured thanks to rising home prices? How much will your insurance company pay you if your home is destroyed? How are renters protected during natural disasters? And who should you contact to make a claim? All these questions (and more) are answered in today’s bonus episode of the BiggerPockets Money Podcast.  In This Episode We Cover How home price appreciation greatly affects your insurance coverage  Checking to make sure you’re not underinsured or overinsured  “Binding restrictions” and how insurance companies use them during disasters  Tips for homeowners on getting the most appropriate insurance policy for their needs  Renters insurance and how renters can stay protected as well How to submit and process a claim with your insurance agent And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

The show notes for this episode can be found at biggerpockets.com slash money show 265-5. Welcome to the Bigger Pockets Money podcast, Homeowners Insurance Fire Bonus episode, where we talked to Steve Longnecker from Mountain Insurance Longmont about your homeowners insurance policy. I promise it's not as boring as it sounds. It's a bit challenging for some of these folks because they're trying to figure out, well, where am I going to live for this period of time, how much is it going to cost me? and how long will that, you know, loss of use coverage, you know, be able to retain me? You know, if I can, if I need to spend a couple thousand bucks a month, you know,

just to live in a VRBO or somewhere that I find, you know, and if I have a year's worth of coverage, well, what happens next? Hello, hello, hello. My name is Mindy Jensen and I am here to make financial independence less scary, less just for somebody else, to introduce you to every money story because I truly believe that financial freedom is attainable for everyone, no matter when or where you're starting. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or start your own business. I will help you reach your financial goals

and get money out of the way so you can launch yourself towards your dreams. Today's guest is a longtime friend of mine, Steve Longnecker, an insurance broker from Mountain Insurance Longmont. On December 30th, 2021, fires ripped through almost a thousand homes in cities a few miles south of where Steve and I both live. An article in the local newspaper brought up the possibility that in addition to losing their homes, some of these homeowners may not have had adequate insurance coverage due to the recent double-digit percentage value increases our local market has seen. Talk about a double whammy.

So I brought Steve in today to answer a bunch of questions about homeowners insurance. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments,

net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code Pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets.

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regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Steve Longnecker, welcome to the Bigger Pockets Money podcast.

Thanks, Mindy. It's great to be here. I appreciate that. I'm so excited that I know an insurance broker so I can ask all these questions because this is really timely for not only people who live locally where we are, but in markets all across the country, housing prices have gone up. I'm seeing 10 and 20 and much more than that percentage increases, and you could be underinsured. So what happens if I've had a homeowner's policy for a couple of years and my house burns down in a fire like this?

with the price appreciation we've seen, someone who insured their house for replacement value a few years ago, maybe even a year ago, might not have enough coverage. So let's use round numbers for the ease of math. Let's say I bought a house for $500,000 and insured it for $500,000. But now it's for $750. Ignoring land value for just a moment, what happens to that delta of $250? Will the insurance company only pay out $500,000 and now I'm scrambling for that extra $250? I mean, that makes sense, but that also really stinks for somebody who is in this situation. So what can people do to protect themselves from this situation in the future?

Because housing doesn't look like it's going to be easing up anytime soon. I just threw like 17 questions at you right there. Yeah, no problem, Mindy. So very good questions, by the way. There's a lot of different ways to approach the coverage questions that you're asking. To begin with, as you mentioned, when anybody puts it up, policy in place with an insurance company. The first thing that happens is that the replacement cost is calculated, typically by the agent, may also be double-checked by the carrier itself or their

systems in the process. And so at that time, the home should be insured around the replacement cost. And that cost, you mentioned a lot about market changes, but that cost is really technically derived from what it would take to replace it, you know, from a construction standpoint. Now, you know, beyond the increase in home values, you know, we're still in the middle of a pandemic here. And with the, you know, with the lack of supplies for things like lumber and drywall and other things, that's also driving up the cost of construction right now, as well lack of labor. So there are other things at play here, you know, even beyond just the, just the local market issues. But, but that replacement cost is derived at least to some degree by,

you know, some of the things I'm mentioning here, along with, you know, where is located, the size, and so forth. And so to start with, when that home is initially insured, it should be pretty close. But over time, as you mentioned, because of all these changes, you may end up in a, in a place where your home would cost a lot more than it did a few years ago if it hasn't been looked at. Insurance companies are pretty good at looking at those changes, so they will notify and sometimes even automatically increase the coverage levels for you. I can't say that all insurance companies do that, but that is a fairly standard practice, especially as things are changing rapidly over the last few years.

The other thing that many companies have, I can't say all policies or all carriers do this, but quite a few of them have what they call extended replacement cost, which is built into the policy. And that could be anything from 10 or maybe 25% over the actual coverage limit that you see in your declaration pages. It could even be higher than that. It could be 100% now some of the companies are offering. and many companies even offer what's called full replacement, which really means it doesn't really matter what it says in the deck pages. If your house burnt down tomorrow, they're going to calculate, you know, along with your input,

of course, but they're going to basically calculate what it would cost to replace that home and they're going to cover it to the full extent, minus deductible, that kind of thing. But so there's a lot of sort of safety nets, if you will, that, that those policies can have in them. That doesn't mean they all do. So you really need to check with your agent or check with your policy. If you can, you know, get through that and read through that documentation. But one way or the other, you should be able to, you should be able to look to see what sort of safety nets are available there.

Okay. And is it, it's called extended replacement cost? Yes, normally, right. Or full replacement costs. And would that, would that language be written into the policy? I don't know if you know this or not, but those policies aren't so easy to read. Yeah, it will be somewhere. And then that's a little bit tricky, too, because you'll see the main coverage limits on your policy,

you know, the dwelling, which is the building, personal property, which is the contents, and some of the other items. But you may not see that extended replacement cost listed right there. It could be a couple pages later. It could be 25 pages later. So, yeah, if you're not an expert or interested in reading through all of that, then it's, It's best detect your insurance agent probably. Okay.

And yeah, that is something that I'm going to recommend everybody listening right now, call up their insurance agent or if you really enjoy reading that documentation, plow through there and see if you have that coverage. Can you request the 100% or the like 10 to 25%? I mean, in the height of the pandemic, some of these, like, wood was going, the cost of wood was going through the roof. and some of these new-built houses were calling up there previously under contract customers and saying, hey, it's going to cost an additional $30,000 to get that house built.

And if you're not willing to pay that, I'll just refund your money because I've got a line of people who are willing to pay that. Yeah, again, it's kind of handled in different ways. I would say that typically if you're with an insurance company that has some of those options available, you know, if you have a good agent, they're probably, they probably already have that in the policy, I would say at least the 25%. If you're with a company that maybe doesn't even offer that or doesn't push it or something like that, it may or may not be available, and then you may need to switch carriers or something like that. Or, you know, the other alternative is

rerun the replacement cost estimate, even if nobody has done that. You can do it proactively, just ask your agent or your carrier to do it. And then, you know, then they could bump it up. But of course, that only helps you kind of now and in the near term because there again, a couple years out, if there's no real added protection beyond that, then that's where you're at. And if the price of change again, you forget about it, your agent forgets about it, you're kind of back, you know, to where you are, you know, behind the curve again. Yeah. Okay. So this kind of covers my second question, which is, if I'm not in a situation where my house is spurned down, how do I right now insure my home? So, let's see, is it possible

to be overinsured? And if so, what happens during a claim? Like if I insure my house for $750, but it's only worth $500, they're not going to just write me a check for $250, right? No, they're not. The intent of insurance, pretty much all insurance policies, the intent is to not be better off than where you were, you know, before your loss. And that may be, You mentioned before we started the show about a friend of yours that was trying to increase their limit in a mountain home, and I don't know, the insurance company wouldn't allow it for whatever reason. Maybe they just didn't think that it was worth that much or something to that effect. So, you know, there are other ways to get around that a little bit. You know, that replacement cost estimate that I mentioned, you know, your agent, at least in our case, our agents, have the ability to run

those reports. And they can be tweaked a little bit sometimes. You can change the quality level within that report, and that could make a substantial difference. So if somebody's feeling like their home is underinsured, that quality could be bumped up, and they could convince the insurance company, at least to some degree, that they should have higher coverage limits. but most insurance companies aren't going to go beyond a report like that, you know, much beyond a few percent or maybe 10 percent or something along those lines, because they don't want to get into that situation that you mentioned where you're overinsuring and then maybe even potentially making money on it.

That's not likely going to happen anyway, because the way claims are handled is that whenever you have a loss of any sort, whether it's a full. loss or maybe just a new roof or something like that, they are really only obligated to pay out what's called the actual cash value or the depreciated amount of the coverage. So that's usually going to be 60 to 80 percent of the full claim value or the full home if it's a full loss. And then once the work is done and you can show receipts or your contractor does, then they will pay up, you know, to that amount, assuming it, again, it doesn't go over the coverage limit or the coverage limit with the extended endorsement on top of it.

So, you know, you might think that you're going to get away with, you know, making some money or something by over-insuring. But at the end of the day, there's too many, too many checkpoints for that to even happen. Okay. That is good to know because I certainly don't want to pay for more insurance than I have to. Let's see. You sent out a letter to all of your clients recently that was super, super helpful. One of the things in the letter mentions a binding restriction and says you can't write any new policies right now or make any changes to policies within a certain location. Can you explain what this binding restriction is?

Because I've never heard of this before. And does this include people who may be buying a new house? What if I just bought a house, you know, three blocks away from where everything burned down? I get a policy? Well, so those binding restrictions happen. Anytime there's sort of a catastrophic event that occurs pretty much anywhere in the country. But I would say here in Colorado, we see binding restrictions, you know, probably about every quarter, but for some reason or another, it might be because of a hailstorm or a threatening hailstorm.

Many are fires. And, of course, last week, we definitely had some of those. They're usually limited by zip code. And every carrier doesn't necessarily restrict the same exact locations, but usually within 24 to 48 hours, almost all the companies have the same four or five zip codes or whatever it is on the list. And then normally after the event occurs fairly quickly within a day or two, you know, those binding restrictions would go away.

and I haven't, technically, I haven't seen anything yet from last week, but I'm sure now with the snow and, you know, the fire's pretty much being gone that you could go in now and insure a home or something to that effect. But they're made, you know, to protect the companies, quite frankly, so that people don't call, you know, call in and try to ensure their burning building, unfortunately. but, you know, that's what they're there for. That makes sense. I mean, you can't not have a homeowner's insurance policy, discover that your house burned down, and then call up and say, oh, could I get this retroactive? Yes, exactly. Let me pay you $100 for this one month of coverage and then you're going to pay me $700,000.

That makes sense. Okay, so if I'm in an affected area, when can I revisit my policy? Is it, you said 24 to 48 hours, does it last? for a really long time? Or is it just like we had a fire and the fire lasted because it was so, we had those winds and the fire lasted for probably like 24 hours. Is that when it's locked out? Or is it like, is it still under a binding restriction right now? Well, like I said, I haven't, of course, I don't follow every single email about these things. But usually we get a whole bunch of emails, you know, restricting an area for a period of time.

when the events going on. And then normally within, like you just said, within a day or two, those are off. I would be really surprised that they're still having binding restrictions in those areas. But this was also a pretty severe fire. Things could be a little different. Maybe the companies are just nervous and they just don't want anybody to possibly try to pull any wool over their eyes and do anything that is out of line. And so I don't know.

I think the answer is check with your insurance company and find out if they're still under restrictions and, you know, they'll let you know. Yeah, as soon as I'm off the call with you, I am going to call up my insurance company and be like, hey, we need to revisit this because my health is worth a whole lot more than it is than it was when I bought it. Okay. So let's talk about some general tips and advice for how to handle your homeowners insurance policies going forward with specific focus on insuring rentals because a lot of our

audience are investors. Should you renew every, should you review your policy every year on its renewal date or like a specific calendar date, January 1st, this would have been really, really good for people to renew or review their policies on December 29th in our local area. Well, I mean, the renewal process is pretty automated these days. Almost all, you know, auto policies, rental policies, homeowners policies, they almost all automatically renew a year from the date that they were started originally. Those dates can be moved around for people if they need something more convenient at a certain time or they want it to renew on the first or something. It's a little bit of a pain, but it can be done. But I would say, yeah, a good idea is probably a month

doubt or so, we typically will remind all of our insurers that they have an upcoming renewal and if they have questions or want to change anything to get in touch with us. And a very small percentage of them do. Everything else just automatically renews and continues forward, typically with little change unless the insurance company has done, like I mentioned, a replacement cost estimate and has decided that they feel that it's underinsured, then things could change in that regard. But I would say that's probably more rare.

But, you know, an annual review a month before is always a good time. And some insurance agents, you know, if they have a lot of time, maybe outbound calling people, but I think that's probably more rare. I think everything tends to be more automated with reminders and emails and things like that. Okay. And I don't know if you're the right person to ask, But is the mortgage company, do they have any responsibility to keep up with how much the home is insured for based on, or would they not because they only have the fixed mortgage amount out? I would say probably not in most cases.

The one exception to that, though, is on the front end when we're initially analyzing the replacement costs and putting a policy in place or at least quoting one. Mortgage companies or lenders sometimes do come into play there because the coverage limit needs to be at least the amount of the loan to protect the lender. But with our previous discussion and talking about the increased costs of building and so forth, that becomes more rare these days that it would ever end up being lower than the loan amount. So, but that would really be the only time when when the mortgage company is involved in the, in sort of the evaluation process, if you will. Okay, that makes sense. Let's talk about a claim. Let's go back to our 1,000 homeowner nearbyes that now have to start a claim for their property.

How do you start a claim? Is there any negotiating with the insurance company or do you just kind of get what you get? can you appeal what they're offering if you feel that you are owed more? And is it better to go alone or can you hire somebody to help you through this? I mean, this is an insurance company that you're kind of, it's not really an adversarial relationship, but it kind of is because you're now at odds with each other. Hey, I want this much. Well, it's only worth this much. Are there people that you can hire to kind of advocate for you? And I don't know if you saw pictures of the

burned out locations, but there's a lot of cars that are sitting on driveways burned out. So is my burned out car an auto claim or a homeowner's claim? Wow, yeah, a lot of questions, Mindy. Yeah, that's my M. So, interestingly enough, I sat through

the first of probably many calls that the Division of Insurance held last night. They called it their town hall meeting, the first one. They're planning to do many others. Commissioner Conway did a great job of kind of going through a lot of that, at least at a high level, and talking through mostly with homeowners who have lost their homes. I think there were 800 people on that Zoom call last night.

And he went through some of that. Their office is really set up. I don't know how well they're set up to handle 800 or 1,000 people. But their office, one of the big things their office does is deals with. with or helps homeowners to deal with these kinds of issues where there's some kind of disagreement that's going on and trying to get claims handled effectively. I don't even think anybody's to that point yet. I mean, everyone's still trying to sort out what's going on, who's going to do the cleanup,

how construction or reconstruction could possibly happen. Is it everybody for themselves or is there going to be more of a consolidated effort? But, you know, some of the things that you're asking about related to claims, you know, first of all, you know, anyone who's had a loss needs to get out there and get their claims started. And the commissioner mentioned that many times. And so that's really what needs to go, you know, needs to happen to get the whole process started. Now, as far as being, you know, underinsured or having those issues, yeah, that's possible because all of those safety nets that we mentioned before, people may not have. They may have been insured for 30 years and have a kind of a plain Jane policy and with no extensions on it. And, you know, there unfortunately are going to be some people in that case where maybe nobody can help them. I don't know that for sure. You know, certainly the Division of Insurance can get involved. There's also something called a public adjuster, which the division, I think, has some of their own. But you could also go in

hire. So if you believe that maybe the insurance company's evaluation of, you know, some kind of replacement cost is different from, you know, what's reality. You could, you could hire them to, you know, to kind of do their own analysis, which would be much more extensive than the kinds of reports that I was talking about earlier. The other thing that the division mentioned a couple of times, too, is that FEMA is involved in this loss. So because this is considered a essentially an emergency, a state emergency. FEMA has funds and has people and resources available as well. So if you were uninsured, that's probably another place you could go to talk to them about

potentially, you know, helping you cover that gap. And FEMA is involved every time that it's declared a, what was this declared, a public state of emergency? What is the phrase? Yes, well, the FEMA is the federal emergency management administration or something like that. But yes, any time that you have a big disaster, whether it's a flood or a fire in this case, and, you know, the state basically declares a disaster area and is looking for federal support, then that's when FEMA steps in.

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Is loss of rent automatic in a rental policy? Like as a landlord, is that automatically covered? Or do I have to ask for specific loss of rent coverage in an insurance policy, in the landlord insurance policy? Yeah. So both renter policies or I should say landlord policies, a little different than renter policies, but a landlord policy or a homeowner's policy,

both have that kind of coverage could be called loss of use. The more generic term is aLA or allowable living expense. That's more on the homeowner side. But those kinds of costs related to the fact that the billing is not usable or, you know, with a landlord policy, is not rentable. They do have a whole wide range of coverages. that could be available there. Again, that was a big part of the discussion in last night's town hall meeting that I was mentioning. Some of those policies restrict the amount of coverage

based on a timeline, some of them on a total amount, and some of them both. And so that was another discussion because most people don't believe, and I'm sure they're right, that they're going to get their house rebuilt within a year. and many of those policies do restrict it to a year. So it's a bit challenging for some of these folks because they're trying to figure out,

well, where am I going to live for this period of time? How much is it going to cost me? And how long will that, you know, loss of use coverage, you know, be able to retain me? You know, if I need to spend a couple thousand bucks a month, you know, just to live in a VRBO or somewhere that I find, you know, and a, you know, and a, you know, and a, you know, if I have a year's worth of coverage, well, what happens next? And the state, again, is going to try to get involved in that. They did, apparently they did that previously up in, when they had the fires up in Grand County.

I don't know when that was a year or two ago, I guess. And they basically went to the insurance companies to say, hey, guys, you know, we're not really looking necessarily for more coverage, but how about a longer time period? Let's get rid of this time limitation. so people have more time to get their lives sorted out. So that's a discussion as well that I'm sure is going to happen again exactly where it goes and so forth. It's too early to tell, but hopefully they'll be able to help.

Yeah. So in the case of this specific event, does loss of rent coverage cover the entire amount of rent that you would have been getting for as, well, I guess not as long as it takes to rebuild or we don't know yet, but does it cover the entire, like if I, was renting this house out for $3,000 a month, am I going to get $3,000 a month until it's rebuilt or for the length of time? Well, I think that's the $64,000 question, especially related to what I was mentioning about potentially changing some of those restrictions, you know, through the states to negotiation. But as I mentioned, too, every policy is different. Some are based on a certain amount.

Some are based on time. Some are based on both. On average, I would say most of the time what I've seen is kind of a default to that is it's typically, you know, somewhere in the order of about 10%, if it's a, if you're just talking about the dollar limit, it's about 10% of the dwelling amount. So if you had, say, a $400,000 house, you know, again, if you're kind of going with typical, you might be looking at a $40,000, you know, limit for that. that kind of thing, which, you know, that could last you a while if you didn't have to worry about the time element. But on the other hand, you know, if you've got to go two, three years without a house, $40,000 might not, may not get you there either. So every situation is different and I think it's still a bit fluid right now. Yeah. What I'm hearing from you is that if you have a home, you need to talk to your insurance company and make sure that you are getting the proper coverage

based on how you're using that house. And a landlord policy is really, really a great thing to have, but you have to have the proper coverage even through your landlord policy. And I know insurance is getting expensive. And part of the reason it's getting expensive is because there's these claims like this, but you need to be covered. And can you imagine saying, I don't need that coverage. And then all of a sudden, your house burns down and you're like, oh, 50 bucks a month would have really been a better choice. Yeah, I mean, you're absolutely right, Mindy. And, you know, that's one of the things that we've dealt with over the last few years is that with the increase in rates, you know, everybody's looking to save a dime, to be honest. And sometimes it almost really is a dime.

And we put a little plug in for our agency. We're really, really careful about getting people to. the right coverages in all of these different areas you mentioned and even some that we haven't talked about so that people have, you know, maybe not the Cadillac, but certainly a very good, you know, policy in the event of especially major problems like this. Not everyone in this industry, unfortunately, works that way. People sell all kinds of stuff. And, you know, it looks like it's going to save them 100 bucks a month, 100 bucks a year or something like that. Well, then in the end, when there's a major claim, it could cost some, you know, tens of thousands of dollars.

The other area that we really haven't talked about at all, which doesn't really come into play necessarily in this fire, and that is roof coverage. And that has really gone in a lot of different directions in the last five to ten years, in that carriers are, you know, there's some carriers out there who have still have very, very good coverage, you know, rates are probably not as good, but at the end of the day, if another big hailstorm comes through and hits, you know, hits homes like it has in the last four or five years, you really want to pay a little bit extra to make sure that you're going to get replacement cost on your roof. Because there's so many carriers now that are not doing that.

Actual cash value is the other route that many of them go. They don't necessarily call it that. they'll call it a sliding scale, but it's the same thing. So if your roof's 20 years old and you're on a sliding scale, you're probably going to get, you know, 80% of the value of what it would take to replace that, unfortunately. Oh, okay. Well, that 80% is still a lot more than I thought you were going to say because our roofs kind of get degraded with the sun.

But yeah, that's still, I mean, a roof is $15,000 to start. I was shocked the first time that I got a quote. I was like, what? I thought these are $5,000. Well, they used to be when I was doing them 10, 15 years ago. But now they're like, they start at $12,000 and $15,000. So you need that coverage or you need to have money set aside to pay for it yourself. And the difference in policy cost can be really nominal.

And of course, every policy is different. I can't ask you to quote on my house because you're going to need 17,000 different points of information in order to give me an accurate quote. But your policy, your coverage goes up to what you need. It doesn't exponentially raise your premiums. Right. And you need the coverage unless you have the funds to be able to replace it. And I just, my heart.

breaks for these people who probably didn't listen to my show and aren't financially independent and don't have, you know, the funds to cover this. And if they are very undercovered, this could be financial ruin for something that isn't even their fault. Okay, Steve, let's move on to a renter's policy. If you were renting in one of these homes and had renters coverage, what does a renter's policy typically cover? Well, a renter's policy is really, in a way, kind of like a slim-down homeowners policy. There's also something called a condo unit owner's policy, which is essentially the same as a homeowners. It's just you don't insure the shell of the building, really, is just your own unit, you know, things that you've put into your unit, attached appliances, things like that.

renters is slimmed down yet again, where it doesn't have any of that. It just has the contents, and then liability. All these policies have personal liability on them. So that actually brings up a good point. There was a lot of discussion in last night's meeting about personal property, because that's really the sticking point when it comes to these claims. If your home is destroyed or mostly destroyed, figuring out the value of that is not. rocket science, that's fairly easy to do with construction costs. You know, figuring out the plan of how to get it replaced is different in that, and there's certainly a lot of discussion there.

But the contents is really where things get sticky. And there again, insurance companies are all over the board when it comes to, you know, what do they want? What do they need? You know, historically, the request has always been. hey, give me a list of every single thing that you lost, and we'll give you the, you know, if you can kind of show us that you had it or at least give us a list somehow, we'll give you the money for it. And companies are starting to make that a little bit easier.

They're not necessarily requiring receipts for everything. You know, they're giving you spreadsheets, take as long as you want. But even that's hard and extremely emotional for people, right, to try to go through your home. If you think about it, if you've had a home for 20 or 30 years and you had all of your memorabilia and your photos and everything's just gone. And now some insurance company is saying, well, I need a list of everything in order to pay for it. That's just really hard. It's hard in a lot of ways. So that's another negotiating point, believe it or not, with the division of insurance.

They're really pushing these companies to try to make it easier on people, try to get it to be streamlined, as much as possible. The one thing that was mentioned last night is that right off the bat, the insurance company by Colorado statute is required to give homeowners. This does not apply to renters, but for homeowners, they're required to provide at least 30% of the insured amount for personal property right off the bat with no list or nothing. So that will help people get back on the ground, you know, at least a little bit. they'll get that money and they'll be able to start, you know, purchasing things if they're

living in an apartment or VRBO or something like that. At least it'll, you know, kind of get things going. But many of the companies do want, you know, as much documentation as you can, you know, dream up or maybe if you have videos or pictures or something. You know, every time one of these things happens, I get this idea to go around and videotape my house. And I think I've done it before, but I need to do it again because you just never know. And if you have that somewhere, you know, hopefully off-site, you know, if something bad happens, and you could go back to that recording and then go and start with that. Yeah, I'm trying to think, I don't have receipts for any of the stuff that's in my house.

And even if I did, it would be in my house. If my house burned to the ground, all of my receipts are there too. I think it's rather silly for them to ask for receipts. Let's talk about that 30% of the insured value just being sent to you right off the bat. So for ease of math, I have a home that I have insured for $100,000. They're going to send me a $30,000 check. No, that 30% is of the property limit. And the property limit, again, can vary a little bit, but typically it's about 65% or 70% of the dwelling amount.

So again, you have to look at your declaration page of the policy to see that. But if you kind of do the math, you're looking at more like, you know, 30% of 70%. So it's still a significant amount of money. But I'm sure you're going to burn through it pretty quickly if you lost everything. Yeah. But that's going to be helpful to get, I mean, this fire was no notice at all. It wasn't smoldering for a while and then flared up. It was nothing.

and then it was like it ripped through this neighborhood and it was all of a sudden, hey, I think I smell smoke and you walk outside and you're like, holy crap, my neighbor's house is on fire as are all the other houses and the winds are whipping up. I need to grab my kids, grab my pets, jump in the car and leave. And you couldn't grab even like, you know, your bag of things that you might, like, I wouldn't think to go through and grab birth certificates. In that situation, it was grab your keys. and get out of the house.

Right. And there's just nothing left for these people. It's just, oh. So they're going to get a check. They're going to be able. I mean, like, they don't have clothes. You have the clothes on your back and that's it. You need socks and underpants.

You need coats. I mean, it was kind of warm that day. And then the next day, we had seven inches of snow, which was, you know, bringing up new problems because all of the electricity and gas was turned off. I hope that the water was turned off. know if you can turn it off, like, remotely, like you can do gas and electric, but now we're talking about burst pipes. So your house didn't burn down, but now everything's ruined because

the pipes burst. So there's, like, insurance, you need homeowners insurance unless you're a battrillionaire, and even then you need homeowners insurance, too. Let's talk about processing a claim. My house burned down. I am over the initial shock, and now I need. to start processing a claim. Do I call my insurance agent or my insurance company first? Well, that probably depends a little bit on the situation. I think most people probably call their agent. You know, with us, typical cases, many of our claims, we really just forward them on to the insurance company because there's so much back and forth that goes on. You know, it's better that they just get in contact with them from day one and, you know, get their questions answered.

So if we just spend, you know, for the middle man here, is just so inefficient for everyone involved. There's some exceptions to that. And certainly in this case, as we did have a few folks in those fires. Not many because we're way up here in Longmont. And, you know, that's 20 miles from here or something like that. And, you know, luckily for us, we didn't have a lot of losses there. but the couple that we did have, we've been handholding them quite a bit just because of the whole situation. But in most cases, you know, once people get the claim started, they're going to be assigned an adjuster who's going to ask a million questions and give a lot of information about what they need to do next and, you know, collect their contents list and that kind of thing.

My heart just goes out to all these people that lost everything. And it's not just one person. I mean, there's almost a thousand buildings. I think it was 991 buildings that were destroyed. And they had a list of the addresses. Nine of them were companies and the rest of them were all houses. And it's, I mean, most of these houses are just to the ground. There's nothing left except these weird, like charred cars on the driveway.

And then these weird brick stacks that used to be like the entrance. around the door and the trim around the bottom of the house. And even in some cases, not even that. Steve, is there anything else you want to tell people about homeowners insurance policies or processing a disastrous claim before I let you go? Well, a couple thoughts here. One is just in comment to what you were mentioning. There are a lot of other homes and probably businesses as well that were damaged

in different ways. So, you know, safety is number one there. There could be a lot of different things that are existing there. There could be broken pipes or about to break pipes. There could be, you know, damage related to smoke and so forth. So there was a lot of discussion again on that meeting last night about what are the next steps and, you know, just being very cautious in going back into those buildings, you know, secure. Curing them, of course, at some point is important, too. But people just need to really follow the local laws and the local regulations. There's kind of a disaster site that is set up in South, I guess it's South Lafayette off a public road,

where there are a whole bunch of people there from FEMA, people there from the state. insurance. There's maybe a dozen insurance company trailers. It's just kind of a whole village, if you will, of support that people can get for all of these different areas and certainly getting advice as far as, you know, if you have a property that it's still standing, you know, what to be doing next. As far as homeowners insurance goes, I think we've covered it pretty well. But, you know, just sort of the summary is that, you know, a lot of times people are not very excited about insurance. They don't like paying for it because they never use it. But, you know, having it there when it's available, you know, after an event like this and having good coverage is so important.

And, you know, to skimp, to save a dollar here or a dollar there, you know, you may think that you're, you know, you're saving some money over a long period of time. And you certainly are. But if it comes to a situation like this, you know, that savings could go out the door, you know, just immediately, unfortunately. Yeah. Well, Steve, I really appreciate your time today. It sounds like the situation isn't quite so dire as I initially thought, although you do need to check. If you haven't renewed your policy in the last six months, I would call up your insurance agent and just double check that you are covered, that your policy does have that extended coverage, extended replacement coverage. And check in and see exactly what your insurance policy does cover because this could be, like you don't need it until you need it. And then you can't change it when you do need it. So Steve, I appreciate your time today.

Where can people find out more about you? Well, our website is we insure co-business. That's Colorado Business. We insure co-business.com. We're focused in the business arena. but we also do a lot of home and auto for quite frankly for many of our business owners and for other people who are, you know, who need it in the area. You can also reach us. Our main phone number is 303-808-9351.

Okay, Steve, I really appreciate your time today. I learned a lot. I'm very glad I had this conversation with you from the Homeowners Insurance Fire Bonus episode of the Bigger Pockets Money Podcast. I am Indy Jensen saying stay safe and protected.