Planning For The Unexpected
Two weeks ago the devastating Marshall Fire tore through the tranquil communities of Superior and Louisville. Some clients are now asking questions about their homeowners insurance, the steps they can take to best prepare for such an event happening to them, and what happens next for our local real estate and rental market.
First, it's important to note that probably no one living in heavily suburban Boulder, Louisville or Superior, CO thought a wildfire was a risk to their home and family. Too often I see clients wanting me and/or the insurance broker to name specific loss possibilities with the hope of ticking off potential loss events as, "that won't happen to me so I don't need to buy insurance for it." As local insurance broker Steve Hakes of Rocky Mountain Insurance Center noted, "...the unexpected CAN and DOES happen.... and we need to be prepared. Nobody could have guessed such a destructive, fast-spreading fire could rip through a densely populated area, but it did." The moral of the story is we can't think of everything that might happen but we can help you identify and purchase the proper types and amounts of coverage to cover you for a loss if the unknowable does happen. So please, be honest with us about your home and then be prepared to buy the proper types and amounts of coverage to adequately insure it.
Next, understand your homeowners insurance and what it says. For ongoing financial planning clients, I will suggest a detailed review of your insurance package every few years. I'll review coverages myself but I also suggest you review the policy with your insurance agent or broker. Of particular recent importance is your "Coverage A" or "Dwelling Coverage." This is the amount of money your insurance company will make available to you to rebuild your home in the event it is lost. Understand recent inflation has pushed the cost of labor and materials strongly higher the last few years. While insurance companies do implement an "inflation index" which will steadily raise this coverage over time, it's very possible this index has been too low for our area. If it seems low to you, let's talk. Or, better yet, ask for a review from your insurance broker/agent. They'll also be able to tell you about a number of optional coverages which have recently become available.
Additionally, you and you alone can take some helpful, practical steps. First, purchase a fireproof safe for your family's important documents such as birth certificates, social security cards, vehicle titles, passports, etc. Next, take your smartphone and make a video of your home. Go room to room opening cabinets or drawers as you come across them. You're documenting the contents of your home for insurance purposes. Once you're done, upload the video to the cloud or, if you're not comfortable with that idea, burn it to a CD and put it in the fireproof safe box you just purchased. This video will help you quickly and accurately recall what you own and serve as proof for the insurance company.
So what about the real estate and investment side of this disaster? Ken Crifasi of K&A Properties suggests, "Some of the people displaced by the fires will become renters, some will become buyers, and some will move away all together. The ramifications from this will be felt for years to come. We can likely expect that Lafayette, Broomfield, Westminster and what remains of Superior and Louisville will likely see higher demand in both the purchase and rental markets as those impacted by the fire disperse." In short, if you were hoping for a home price decline in 2022, you're probably not going to get one. Over 1000 families are now looking for someplace to live for the next 12-24 months. Supply was already tight and we simply don't have an extra 1000 homes lying around. Furthermore, construction labor and materials are likely to remain in short supply for those seeking to renovate their existing homes. All-in-all, not great news unless you're in the contracting business or have a property you'd like to sell soon.
For those of you who lost everything, my heart is with you and I'm ready to help in whatever way that I can. While nothing can replace what you have lost, know that you have a loving community ready to support you in whatever way we can.