In Case Your Number Comes Up

Jon Bull, a First Republic Portfolio Manager, Spectrum

The TV screen showed a full moon, large, and orange from wildfire smoke, against a black sky. The camera panned down with no sound, obviously one of those artsy shots that sometimes end the news shows, and stopped on a rubble pile, shades of grey in the camera’s floodlight.

The camera held steady and I did a double take: unbelievably, still standing straight up in the jumble was a familiar wrought-iron door frame—mine. The camera panned, and there was my wrought-iron stair railing trim detail still recognizable, if somewhat bent and melted. The news anchor’s voice came up, but I don’t remember what he said, as I sat stunned, watching the nighttime images, speechless for once.

We had been told by phone, first, that our home had survived, and then that it had not survived the most recent Santa Barbara wildfire, but now it was all very real for me, for my wife, and for our dear friends who had offered us shelter. We sat in silence, the four of us, holding back tears. Living in California, you plan for this. Living in the foothills, you think about fire and earthquakes all the time. You work to mitigate, to make safer, all the while thinking, “I’m doing this, but I don’t need to; the chances are remote.” This time, though, our number, and that of seventy other homeowners, came up.

We had done everything right, they said. Annually, we cleared brush below our hilltop home right down to the dirt, and pruned and thinned the Ceanothus and Mesquite below that. We installed backup water systems, a gravity-fed valve for fire trucks to tap into our pool water, bought the same floating pool pump and fire hoses used by all the fire departments, had the local station’s truck and crews up every year for recommendations and that night, had stayed hours past the mandatory evacuation pleadings of police and firemen with a small crew of faithful friends with hoses.

The house and landscaping actually survived the fire storm which blew up from the canyon bottom, flames 70 feet higher than the rooftop. It wasn’t until later, when the firemen were mopping up the smaller spot fires though, that they eventually discovered what was not apparent at first; embers, blown horizontally ahead of the fire storm, had found their way into the outdated sub-floor vents, made to let the house breathe and to keep out rats. By the time we spoke to the firemen again, the entire sub-floor was engulfed. On the phone they described it as flames bursting through the flooring from below, the house too far gone to be saved. All of our planning and doing, our neighborhood meetings, undone by a single sub-floor vent.

The house burned on day three of the fire, so we had ample opportunity to pack the cars. That said, eternal optimism and the fact that we had packed a half-dozen times in the past for nothing, led to our underpacking. I got out with some jeans, polo shirts, our computer, several favorite bottles of wine, and a few pieces of art. When we had time to pack on days one and two, we didn’t take it seriously—the wind was blowing the fire away from us. On the evening of the third day, we were too busy with hose duty to think clearly about packing. In the end, we left almost everything we had accumulated in the last 33 years behind.

Still in shock, we met with our insurance agent the next morning, and he immediately directed us to a local high school, where a dozen insurance companies had set up tents. They confirmed our coverage, gave us a check for $5,000 to cover some short-term expenses, a plastic zip-lock bag in which to save the receipts we would accumulate in starting to rebuild our life, and some brochures designed for fire victims. We were directed to the next table, where all of the insurance companies had outsourced to a single firm, the job of finding rental property. Papers in hand, we drove to our friends’ house, everything we owned right in the back seat and trunk of our cars.

While the writing itself may be therapeutic, the real reason for this piece is to share with you some lessons learned about planning for disaster, in the hope that the road to recovery will be less bumpy for you, if your number ever does come up; you will be forewarned and forearmed.

First, if you live in an area prone to fires, have a contractor take a look at your attic venting, and if your house does not sit flat on a concrete slab, at your sub-floor vents. New ones have steel baffles, or have the capacity to mechanically snap shut when they sense heat. This alone would have saved our house at a truly tiny cost.

Second, review your insurance policy. Martha and I were on top of this and well insured with the right company (so far). In talking with other victims, we find we’re in a minority.

As it turns out, there are several “buckets” of coverage money—you need to understand each of them. I’ll give you the Cliffs Notes here:

PRIMARY DWELLING: You want to be sure that your total number in this category would rebuild your house, at today’s costs. Talk to a contractor friend for a general estimate of costs per square foot for your house style and area, and do the math. If you’re under, call your agent.

CODE UPGRADES: In addition to the rebuild costs, any costs mandated by subsequent changes in building codes will be paid for out of this separate coverage. It is often quoted as an additional percentage over and above your primary dwelling coverage.

CONTENTS: Usually a number that equals a percentage of your primary dwelling amount. This may or may not work for you, but, think about it carefully. Here’s how replacement coverage works: Let’s say your 3-year-old computer burns. You have two choices: You can take the 3-year depreciated value of a similar new computer, or go buy another one of similar profile. If you don’t replace it, you may get a check for 40% of the current new cost of a similar computer (they figure a computer has a 5-year useful life, so 20% of the value is deducted for each of its 3 years of age, leaving 40%). If you do replace it, save the receipt, and you’ll get the full amount. So, multiply my example by the 5,000 items you might have in your house and you’ve got a lot of accounting to do, and a lot of decisions to make.

OTHER STRUCTURES: Definitions of this coverage vary from insurance company to company. For us, it may be a gate or driveway paving. For some, the definition only includes items with at least three walls like a detached garage, storage shed or pool house. Ask the questions.

RELOCATION: During the period you are out of your home, your insurer will likely pay for a “comparable” rental. The maximum period may be up to two years. If you are forced to spend more money for something like longer commutes, or storage, or meals out, it’s all separate.

LANDSCAPING: This is often separate, and generally based on an additional flat percentage of your primary dwelling coverage. Take a good look at this number; it may easily be too low if you have mature trees, or a big lot.

SCHEDULED ITEMS: Some items like jewelry, art, and collectables need to be scheduled separately, at additional premium cost. But not all art, for instance, needs to be scheduled separately. Ask your agent; know your coverage.
The biggest spreadsheet of your life: Accounting for all your personal property is a daunting task, and in some cases, can take up to a year or more. If you think it’s easy, try this: Close your eyes and visualize the contents of a single cupboard in your house. Write it all down, and then go take a look. I guarantee you won’t have recollected 50% of what is there. Now imagine valuing each bowl or planter or book, and then, perhaps, having to prove your ownership. The sheer immensity of this task has given rise to a whole new industry—you can hire your own independent adjuster to prod your memory, build your spreadsheet, and negotiate with your carrier—for about 10% of your final check. I have not yet decided which way to go on this one. I’ve heard pros and cons. But, if you need one, don’t worry, they will find you first.

All of this leads to my last recommendation:

MAKE A VIDEO: A video kills three birds with one stone: it refreshes your memory of contents, it addresses the ownership question, and last, it is invaluable in recording architectural features, or colors, patterns, or prints you may want to see in your new home. Make this video now, this month, walking and talking your way through each room and closet in your house. And do two things: make sure it actually comes out (my big mistake—call me and I’ll tell you the sad tale) and keep copies in another location.

A lot of this is common sense, obvious after the fact. It is easy to put off preparing for disaster—it’s unpleasant to think about, and the odds are usually in your favor if you put it off. And insurance agents are probably right up there with dentists and maybe money managers when it comes to how you don’t want to spend your free time. But do it, if not for you, for me. It’ll make me feel good, and I need that just now. And don’t forget to check your vents.

The views of the authors of these articles do not necessarily represent the views of First Republic Bank.