Unusually Dry Weather Sparks Wildfires Throughout the Country; I.I.I. Provides Insurance Tips for Home and Business Owners To Be Better Prepared

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Washington, D.C.: 202-833-1580

NEW YORK, May 10, 2007 - Prolonged drought conditions and increased construction in brush fire-prone areas has sparked numerous wildfires nationwide. Though the wildfires have done little damage to property so far, home and business owners need to be better prepared, according to the Insurance Information Institute (I.I.I.).

"Fires and wildfires are the second most important coverage in a standard home insurance policy and a very important financial protection for consumers," said Sam Miller, executive vice president, Florida Insurance Council.

Damage caused by fire and smoke are covered under standard homeowners, renters and business insurance policies and under the comprehensive portion of an auto insurance policy. You are also generally covered for water or other damage incurred by fire fighters in the course of extinguishing the fire.

"To protect yourself from the economic consequences of fires and other disasters, it is crucial that you purchase enough insurance to rebuild your home and replace your possessions said Michael Barry, director of media relations for the Insurance Information Institute. "Unfortunately, many consumers do not know what is in their policy until they have to file a claim and at that point it is too late to purchase the right amount of financial protection."

To properly insure your home against a wildfire, the I.I.I. suggests that you ask your agent or company representative two important questions:

1. Do I have enough insurance to rebuild my home?
2. Do I have enough insurance to replace all of my possessions?

Breaking out a home insurance policy into the three essential areas of coverage-the house, your possessions and liability to others-makes it easier to obtain the appropriate coverage.

1. Do I have enough insurance to rebuild my home?

To accomplish this goal, you need to cover the cost of rebuilding your home at current construction costs. Unfortunately, some homeowners simply purchase enough insurance protection to satisfy their mortgage lender. Others confuse the real estate value of their home with what it costs to rebuild it. Quite simply, you need to have enough insurance to rebuild your home in the event that it is completely destroyed. In your discussion with your agent or company representative ask about the following:

• Replacement Cost
  Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar kind and quality.
• Guaranteed or Extended Replacement Cost
  These types of policies provide additional insurance coverage over what it should cost to rebuild your home. This type of coverage can be useful if there is a widespread disaster that pushes up the cost of building materials and labor. A guaranteed replacement cost policy would pay to rebuild your home regardless of cost. Increasingly, however, insurers are offering extended replacement cost policies, which provide 20 percent or more over the limits in your policy.
• Inflation Guard
  This automatically adjusts the rebuilding costs to reflect changes in construction costs. Find out if your policy includes this coverage or if you would have to purchase it separately.
• Building Code Upgrades
  If your home is badly damaged, you may be required to rebuild it to meet new (and sometimes tougher) building codes. Many insurers offer ordinance or law coverage that pays a specific amount toward these costs.
• Water Back-Up
  This insures your property for damage by the back-up of sewers or drains. Most insurers offer this coverage as an add-on to a standard policy.

2. Do I have enough insurance to replace all of my possessions?

Most homeowners insurance policies provide coverage for your personal possessions for approximately 50 percent to 70 percent of the amount of insurance you have on the structure of your home. This means that if you have $100,000 worth of coverage on the structure of your home, you would be covered for $50,000 to $70,000 worth of personal items.

To determine if this is enough coverage, conduct a home inventory. This is a detailed list of everything you own and the estimated cost to replace these items if they are stolen or destroyed by a disaster.

You can insure your possessions in two ways. You can either insure your belongings for their actual cash value or their replacement cost.

• Cash Value Policy
  This pays the cost to replace your belongings minus depreciation.
• Replacement Cost Policy
  This reimburses you for the cost to replace the item. Suppose, for example, a fire destroys a 10 year-old TV set in your living room. If you have a replacement cost policy for the contents of your home, the insurance company will pay to replace the TV set with a new one. If you have an actual cash value policy, it will pay only a percentage of the cost of a new TV set because the TV has been used for 10 years and is worth a lot less than its original cost. Some replacement cost policies also replace the item and deliver it to you. Generally, the price of replacement cost coverage is about 10 percent more than actual cash value.

For reporters covering the wildfires in California, please contact the Insurance Information Network of California at 213-624-4462 or visit their Web site at: http://www.iinc.org/ . For reporters covering the wildfires in Florida, please contact the Florida Insurance Council at 850-386-6668 or visit their Web site at: http://www.flains.org/public/ .

The Institute for Business & Home Safety (IBHS) also provides 10 Tips to Boost Your Home's Wildfire Defense, which can be accessed at: http://www.ibhs.org/ .

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.