Colorado's Fourmile Canyon fire ripped through 160 homes last fall, making it the worst wildfire in state history.
But a year after the inferno swept through the upscale Boulder suburb, a second tragedy has started to unfold for fire victims. More than 60 percent of them are at risk of not having enough home insurance coverage to fully rebuild, according to a recent survey by the United Policyholders consumer group.
To date, only a handful of homeowners have begun rebuilding, with several others locked in bitter arguments with their insurance companies over how much reconstruction will be covered.
"I have seen some of them with just 50 percent of what they need," Stacey Coleman, lead complaint analyst at the Colorado Division of Insurance, says of Fourmile Canyon homeowners.
Coleman adds that for many residents, "the foothills of Boulder County are a lot more expensive to rebuild in than estimated."
Simply assuming your home insurance policy has you covered could be a major mistake, says Carole Walker, director of the Rocky Mountain Insurance Information Association. Rocked by a series of global catastrophes – from killer wildfires to epic hurricanes – insurance companies are placing tighter limits on what they will pay for, Walker says.
"There are things that are included and things that are excluded," says Walker. "Most people buy their policy and put it up on their shelf and don't think about it. In this day and age, you need to be keeping up with it."
The average home insurance policy cost just over $800 a year in 2010, according to the National Association of Insurance Commissioners (NAIC). The amount increases incrementally as additional coverage is added.
Home insurance is especially costly if you live in a high-risk part of the country. Many residents living in hurricane country in Florida have to pay thousands of dollars a year for homeowner insurance, not hundreds, says Ron Moore, senior product manager for auto and home insurance at MetLife.
Most policies cover standard “perils,” from fire and wind to hail and falling trees. If you live in earthquake country or next to a river, you will need separate – and often government-sponsored – insurance, Moore says.
There are three basic flavors of home insurance. Here's what to consider when choosing your level of coverage:
In the end, there is likely no perfect answer to how much insurance coverage you should buy, says Jim Whittle, assistant general counsel and chief claims counsel at the American Insurance Association (AIA) trade group.
“That is why it is so important to know your own tolerance for risk," Whittle says.
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