Californians make their costliest wildfire mistake before a fire starts | Analysis
The Elephant Fire burning in Sierra County is another reminder that wildfire season is now a perennial part of life in California
While not every fire threatens every homeowner, every fire season should remind us to understand our homeowners insurance before we need it.
Most of us never question how our coverage is calculated, or they don’t know how their coverage compares to local construction costs. Being oblivious to these critical questions could become the most expensive financial mistakes they ever made.
When a community burns, thousands of homeowners suddenly need contractors, lumber, electricians, plumbers and roofers at the same time. Waiting lists grow because there are never enough contractors or materials to go around. Then local construction prices rise in what the insurance industry calls a demand surge.
That’s when homeowners discover too late that rebuilding costs have outpaced their policy limits.
“It’s common that it happens for all these large wildfires,” said Tony Cignarale, the California Department of Insurance’s deputy commissioner for consumer services and market conduct.
“We recommend that consumers purchase extended replacement-cost coverage. ... It may not completely fill the gap, but it fills much of that gap of underinsurance.”
Think of this coverage as a financial cushion. If your home is insured for $500,000 in replacement costs, an endorsement providing a 50% extended replacement-cost coverage would make up to an additional $250,000 available if rebuilding costs soar after a major disaster.
The Legislature is debating how to address the gap between insurance coverage and demand surge costs with Senate Bill 876, which, among other things, would require insurers to offer homeowners at least 50% extended replacement-cost coverage over the policy limit and to disclose what that additional protection would cost
The bill is opposed by insurance industry groups that say some of its broader consumer protections are too costly. It’s passed the state Senate in late May and is being debated in Assembly committees.
Cignale said the public doesn’t widely understand that replacement costs have nothing to do with what you paid for your home, your mortgage balance or the market value of your property.
It’s simply what it would cost to rebuild the structure with all of its features today.
Consumers should ask: Do their insurances policies accurately describe their home? Does your policy account for a remodeled kitchen instead of a builder-grade one?
Those details influence replacement-cost estimates.
The Department of Insurance recommends reviewing the insurer estimates every time they’re updated and notifying your insurer whenever you’ve remodeled, added living space or significantly upgraded your home.
One of the most practical suggestions Cignarale offered was surprisingly simple. Take your insurer’s replacement cost estimate and have a conversation with a local contractor.
Even asking what it would cost to rebuild your home on a per-square-foot basis can tell you whether you’re in the right ballpark or whether it’s time to ask more questions.
Meanwhile, here are seven things every California homeowner can do to get wildfire-ready:
Find out whether you’re underinsured. Ask your insurer for its replacement cost estimate. Then run the figure by a contractor familiar with rebuilding homes in your region.
Ask about extended replacement cost coverage. Find out whether your policy includes extended or guaranteed replacement-cost coverage, and if not, what it would cost to add it.
Photograph or videotape everything you own. Use your smart-phone. Open closets, cabinets and drawers. Record serial numbers when possible. Store the video in the cloud.
Review your temporary living expense coverage. If you’re displaced for months, or even years, will your policy pay for housing, meals and other extra expenses?
Update your policy after improvements. A remodeled kitchen, room addition or new roof may increase what it would cost to rebuild your home.
Store important documents digitally. Keep copies of your insurance policy, deeds passports, birth certificates and financial records in secure cloud storage.
Build a financial ‘go folder.” Include policy numbers, insurance contacts, banking information, prescriptions and emergency phone numbers.
For questions or help, California homeowners can call the Insurance Department’s consumer help line at 800-927-4357 or chat with a representative at www.insurance.ca.gov/01-consumers/.
This story was originally published July 18, 2026 at 5:00 AM with the headline "Californians make their costliest wildfire mistake before a fire starts | Analysis."
