Marshall Fire rebuilding: Understanding property insurance claims

Note: This is the first of a two-part series based on the Elevations Marshall Fire Community Town Hall meetings. The second post will publish in May 2022.

When the most destructive wildfire in Colorado history ripped through parts of Boulder County on Dec. 30, 2021, it left a number of our friends, relatives and community members in difficult situations. To help navigate the aftermath of the Marshall Fire, Elevations Credit Union hosted a series of virtual town hall meetings. These videos are available on the Elevations Credit Union YouTube page.

In Part I of the series, we’re answering questions related to insurance claims.

Amy Bach, Executive Director of United Policyholders, and Bobbie Baca, director of the Colorado Department of Regulatory Agencies (DORA) Division of Insurance, were on hand to share their expertise on what property owners need to know about managing insurance claim checks and the claims process. Additional expert insight was shared by Elevations Credit Union’s Liz Million, Senior Vice President of Mortgage, and Todd Peyok, Vice President of Commercial Lending.

Q: Is there an optimal sequence of events when managing disaster recovery?

A: First and foremost, securing temporary housing and meeting the basic physical and mental health needs of you and your family are critical. Work to get back on a regular sleep schedule, establish new routines with the kids and get reoriented so you can make good decisions.

There are deadlines involved in the process, but most are not immediate. For example, you have one year from the date of loss to provide a list of inventory from your property.

This process takes time. Use community resources and ask questions when needed to help you move forward. We like to remind people this is a process that is achieved one step at a time. Your journey and level of impact will look different than your neighbors.

Q: What should I do with the checks coming in from my insurance company?

A: Look closely at the check and determine which “bucket” it’s addressing, such as the dwelling, contents of the dwelling, other structures, debris removal or temporary rent. Checks related to dwellings and other structures, such as garages, barns and sheds, will be made out to you and your lender. These checks will need to be endorsed by all parties, so send them to your lender as soon as possible.

We also recommend starting a separate checking account to act as a holding for any checks made out to you (including payments for the contents of your home and rent assistance funds) so you can easily track incoming payments and outgoing disbursements related to the fires. Make sure to contact your lender directly to see what else they may need and how long the process is expected to take.

Q: How can the funds from the insurance company be used?

A: It depends. The checks for the primary dwelling and other structures should be used to pay off your mortgage loan balance. If there is an overage or an underpayment, you will need to work out the details with your lender. Plan to discuss whether you want to replace/rebuild your primary dwelling or if you are going to purchase an existing property.

Elevations is prepared to help members determine what may be best for them and their future. Some members are choosing to keep their existing mortgages in place and make payments. Others are paying off their existing mortgages (with insurance proceeds) and moving forward with plans to rebuild or relocate.

Q: Why is my insurance claim taking so long to process? Is there a typical timeline?

A: An insurance adjuster will meet with the policyholder(s) to learn more about the dwelling and structures, then the adjuster creates a detailed estimate. As a rough guideline, most policyholders receive their first dwelling replacement estimate and payment for 30% to 75% of the contents of the dwelling within three months of the date of loss.

At this point a call to the insurance adjuster or insurance agency for an update is in order. Remember, local adjusters are handling large numbers of claims right now from the Marshall Fire. It may take longer than usual for a callback.

If no update is available, contact the Colorado Department of Regulatory Agencies Division of Insurance for guidance.

Q: Are additional living expense (ALE) coverage extensions going to happen?

A: All homeowner’s insurance policies offer a “loss of use” or additional living expense (ALE) coverage for 12 months. Many companies bump this coverage up to 24 months.

Sometimes insurance claims get paused or delayed, and the clock on ALE coverage is still ticking. For example, if debris removal is taking longer than estimated, construction can’t start on time. A few months before the ALE time limit expires, contact your insurance agent to ask for an extension. Be ready to explain why you need the extension, such as using the ALE funds for temporary rent payments until your new home is habitable.

Some insurance adjusters will get creative and offer negotiated solutions to help manage the severe housing shortage in the area. This might include working together to buy an RV or tiny home to use as a temporary residence until decisions are made on permanent housing or construction is complete.

Q: Does an insurance rebuilding cost estimate based on the square footage of a home include basement square footage?

A: Yes. A basement is part of the home and there are costs associated with rebuilding it, so it will be included in the estimate. A builder understands what the cost is per square foot for finished space versus unfinished space.

When the estimate is being configured, the adjustor should consider finished or unfinished basement options and offer pricing for both, so the homeowner can choose which they would like.

As of March 2022, estimates range from $260 to $295 per square foot based on builders’ costs in our community. If an unfinished basement is requested, an average of $45,000 to $55,000 is deducted from the building estimate.

Q: If my home owner’s association (HOA) has a deficiency assessment, and my insurance doesn’t fully cover it, is there a loan I can get to assist?

A: Yes. In some situations consider a home equity line of credit, or ask if it can be rolled into a construction loan agreement, new mortgage or another possible solution.

Q: My insurance company offered half of our limits up front. To get the second half, I have to get a cost estimate from a builder to rebuild our home. Is there a way to skip or defer this step since builders are so busy right now and there is an up-front cost for me to get this estimate?

A: Typically to get the full coverage amount of your dwelling, you must follow the insurance agreement dictated by your insurance company. This requires getting an estimate from an insurance adjuster or a builder.

The insurance adjuster should offer a complete, detailed report. If you disagree with their assessment, it might be best to work with a local builder and pay for their bidding service.

Learn more about these specific topics and questions by viewing the Marshall Fire Community Town Hall meeting hosted on March 15, 2022 by Dennis Paul, vice president of government affairs & strategic relationships at Elevations Credit Union.

Do you have questions related to your mortgage, bank accounts or property? Please browse the Marshall Wildfire Resources FAQ or contact us directly.

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