With drought conditions spreading across the country over the past few years, wildfires have become an increasing concern for many homeowners. Based on a 2019 Corelogic report, 775,654 residential homes were at risk for wildfire damage across 13 western states.1 In 2020, the number increased to 4.5 million homes.2 And more than 17,700 homes were destroyed by wildfires in 2020, with California homes accounting for the highest number of losses.3 Protecting your property from the financial impact of a wildfire with insurance is a smart move.

What Is Wildfire Insurance?

 A standard home insurance policy from state-approved insurers typically includes wildfires among the fires they cover. Still, things are changing. Since 2017 and the increase in wildfire damage across the west, insurers in high-risk states are boosting premiums. “It’s important to review the covered and excluded perils in your policy or quote to make sure wildfire is a covered peril,” says Ivan O’Neill, a certified wildland fire assessor, as well as CEO and co-founder of Madronus Wildfire Defense, which helps homeowners reduce their wildfire risk.4

 Insurance coverage varies but typically should cover damage from smoke and fire to:

• Your home’s building or structure
• Any additional structures on the property such as a garage, shed, or apartment
• Landscaping, pool, patio area, and contents
• Debris removal
• Personal property or contents inside the home
• A building code upgrade may be standard or optional
• Additional living expenses

What Will Your Insurer Pay in the Event of a Wildfire?

Each policy is different, so you’ll need to check your limits and coverage. “If you live in a wildfire-prone area, it’s important to make sure you’re not under-insured, meaning that if your home is destroyed, you will receive enough money to rebuild a home with the same features at current new-build prices,” O’Neill says.

Replacement Cost Value or Guaranteed/Extended Replacement Cost

The type of coverage that allows you to rebuild at current new-build prices is called replacement cost value (versus actual cash value) and covers the actual cost to rebuild your home, but only up to a defined limit.

O’Neill says it’s important to ask a realtor or general contractor what the current cost to build per square foot is in your area and multiply it by your home’s square footage to make sure you’re fully covered.

Some states also have policies that offer guaranteed/extended replacement cost, which replaces your home regardless of the cost of building supplies or labor spikes after the disaster as many folks try to rebuild all at once, though this coverage typically costs more.

Additionally, in some areas, building codes have changed considerably over the past 30 years, so folks shopping for policies in wildfire-prone areas should consider getting insurance that provides updated building code coverage during a rebuild. This ensures you have enough money to build your new home up to today’s codes.

Loss-of-use coverage also called additional living expense coverage is another item worth considering. “This coverage is generally affordable and covers the cost of hotels and other expenses incurred while you’re unable to use your home during an evacuation or a rebuild,” says O’Neill.

Additional Peace of Mind

Wildfire Response Endorsement or Wildfire Defense Services are also another protection in addition to your insurance coverage you may find helpful. In wildfire-prone areas, it might make sense to pay a retainer for this service which is like having a private fire department ready to respond if a wildfire threatens your home. The cost varies by company, but some insurers, like State Farm, recently added this coverage for all policyholders.5

With this coverage when a wildfire threatens your home, a class 6 fire engine team (which has wildland brush trucks) is sent to help harden it, close windows and doors, clear defensible space, set sprinklers, and lay flame-retardant foam.

Where Can You Get Wildfire Insurance?

If your homeowner’s policy doesn't include wildfire insurance, check with them to see if you can obtain it. If you’re unable to get coverage due to living in a high-risk area, you may be able to find a FAIR plan, a state-mandated program that provides fair access to insurance for high-risk properties.

In many areas near those that have lost a lot of homes to catastrophic wildfires, admitted insurers are non-renewing customers where they’re allowed to. But in many cases, states’ insurance commissioners declare a moratorium on non-renewals for at least one year after a catastrophic wildfire. If you’re non-renewed by an insurer, you can also appeal the decision.

You can also contact your state’s insurance commission and request assistance. O’Neill says consumers should document (take before and after photos, keep receipts for materials and contractors) and include all the home hardening and defensible space work they've done to prevent wildfires and reach out to their agent to share the documentation and request a formal appeal. 

If you’re non-renewed, your options are typically to buy coverage from a non-admitted carrier (not approved by your state’s insurance department), which costs about three to six times the amount of home insurance from an admitted carrier. You can also buy insurance from your state’s insurer of last resort, which pools high-risk individuals and is likely the most expensive option.

Finally, O’Neill says homeowners in high-risk areas should video their homes and contents annually (not just photos since images can be photoshopped and are less trustworthy). Go room by room and open drawers, doors, closets, and storage areas to document your belongings. For electronics and other high-value items, noting the serial number, make, and model is helpful. Save a copy of the video to cloud storage such as Google Drive, Dropbox, or iCloud.

The Bottom Line

In most non-wildfire-prone areas, your homeowner policy should cover a wildfire. “The best insurance claim is one you never have to make, so it’s important that folks educate themselves about wildfire risks, harden their homes, and manage vegetation to create defensible space around their home,” says O’Neill.