As the Los Angeles wildfires have unfolded, many have assumed that as tragic as the situation is, homeowners insurance will help Angelenos rebuild their lives. But one insurance professional says many homeowners overlook vitally important policy features that can make or break what happens after your home is damaged or destroyed, especially because insurers aren’t transparent about them.
Unfortunately for many people in the path of the raging Palisades, Eaton and other fires around Los Angeles, they will be out of luck entirely when it comes to insurance payouts. Some insurance companies, State Farm among them, began canceling policies in California after the state government refused to allow them to price-gouge customers amid elevated fire risks. This left many homeowners uninsured just before the fires began.
For those who still carried insurance before the fires, however, many are sadly in for rude awakenings, according to an insurance professional who goes by @southernsass401 on TikTok. In a recent video, she shared what she called “the hard truth about insurance.”
It basically comes down to this: Much like UnitedHealthcare and the medical insurance industry we’ve been discussing so much in recent months, home insurers will do everything they can not to pay you — even if your home has been incinerated.
And they get away with it, she said, because most homeowners don’t understand how their insurance policies actually work. Here are seven steps she shared to prevent this from happening and, as she put it, “save you some money and some heartache.”
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“First and foremost, please understand that you are not in good hands,” she said, referencing the long-running Allstate insurance slogan. “They are not there to be your friend, to make sure that you were taken care of…. They are there to collect a premium and hopefully never pay you a dime. And if they got to pay you a dime, they want to pay you as few dimes as they have to pay.”
No matter how tight your relationship may be, your insurance agent will have very little, if any, pull to help you when a crisis happens.
Perhaps even more important is to make sure your salesperson has fulsomely informed you about your policy, and especially that they didn’t lure you into buying the most affordable policy available. When it comes to homeowners insurance, you truly do get what you pay for.
“This matters,” she said. “It’s gonna hit your bank.” An ACV policy stands for “actual cash value.” That SOUNDS good, but it’s actually the opposite. It means your insurer will decide what your home and everything in it is worth, and pay you accordingly.
You can probably guess how well and honestly that will work out. They will give you what they determine your stuff was worth at the time of the loss, not what you paid for it or, crucially, what it actually costs to replace.
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These policies pay you what it actually costs to rebuild your home or replace your burned-up belongings. “This is what you want. This is what you need,” she said. “They’re actually gonna give you the money to rebuild it.”
That is, of course, an entirely different ballgame than being paid what some adjuster — whose job is to literally swindle you — decides you deserve.
Given how quickly homes can appreciate and how much of an impact inflation has on prices, simply having an RCV policy itself isn’t enough — you must make sure you’re updating your policy every couple of years.
This ensures that should your home burn down, for example, your policy will pay you the actual cost to rebuild it TODAY, not what your home was worth two, five, or 15 years ago when you first bought it and purchased the policy.
“We know that the cost of product goes up,” the insurance worker cautioned, “a couple times a year, the cost of labor goes up.” This needs to be factored into your policy.
This is where even many of the best-insured homeowners in Southern California may end up getting railroaded by their insurers. “Here’s a fun fact for you: You can pay for $200,000. You can pay for $1 million worth of contents. You give them that money every month,” she said. “But… if you have a claim… you have to prove that you had that amount of items in your home.”
But all of your belongings have been turned to ash in a historic wildfire; how on Earth can you even do that? This is why the insurance professional said that all homeowners must take this infuriating but necessary, albeit tedious, step.
“You need to take photos of every single room of your house. You need to take photos of your closet, of your garage, your drawers, your cabinets, your jewelry, everything, folks,” she said. This is especially important, she said, for items that are no longer made, have sentimental value, or that are in one way or another irreplaceable.
If the unfortunate does occur, who you choose to work with in the reconstruction of your home is vital. The insurance professional said to make sure you hire a contractor who will “make sure that you have the information that you need to be able to fight your insurance. Because trust me, you’re going to fight it.”
This is because even with the best RCV insurance, insurers will always try to low-ball. So, if your contractor asks to see your insurance documentation, don’t play coy. Hand it over so they can make sure you get everything you need at the fairest price possible.
She warned that dealing with homeowners insurers is often a hassle that can take years to fully complete, even when you’ve done everything right. Having these details in order will streamline the process as much as possible and get you what you need to rebuild your life without being victimized.
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John Sundholm is a writer, editor, and video personality with 20 years of experience in media and entertainment. He covers culture, mental health, and human interest topics.
