Wildfire Preparedness: Is Your Homeowners Insurance Ready for the Unexpected?
Smoke and haze from summer wildfires have become a fact of life in Jackson Hole. At best, they obscure the splendor of the Tetons; at worst, the acidic air hampers outdoor activities and forces us indoors. Most years, smoke drifts in from massive fires raging in neighboring states like Idaho, Montana, and Oregon, sparing us from direct impact but not from its effects.
Every few years, however, one of these natural disasters ignites closer to home. As I write this, the Pack Trail Fire continues to smolder after consuming 90,000 acres of the Bridger-Teton National Forest (BTNF). Although the Gros Ventre Range shielded Jackson, the fire loomed just 35 miles away. Other close calls include:
In 2019, the Saddle Butte Wildfire, sparked by Mylar balloons tangled in power lines, burned over 250 acres in town and nearly spread to the Museum of Wildlife Art.
In 2018, the Roosevelt Fire burned 65,000 acres and destroyed 55 homes near Bondurant, just 32 miles away.
In 2012, the human-caused Little Horse Thief Canyon Fire spread across 3,300 acres near Game Creek, threatening to reach Snow King and nearby neighborhoods.
In 2001, the Green Knoll Fire tore through 4,600 acres near Wilson, endangering 150 homes.
Though Jackson has been fortunate to avoid a major wildfire in recent memory, the increasing frequency and intensity of these natural disasters should be on every homeowner’s radar. If a wildfire were to strike and damage or destroy your home, do you know with absolute certainty that your insurance policy would cover the full cost of a rebuild?
In recent years, property owners in high-value communities hit by major losses are discovering the hard way that they’re underinsured. Homeowners insurance can be notoriously complex, often resulting in unintended coverage gaps that leave people exposed to significant out-of-pocket costs when it comes time to repair or rebuild.
At Bootpack, our Personal CFO service includes an in-depth review of all insurance policies to proactively identify and address potential coverage gaps, helping to prevent costly financial losses. Here’s a quick breakdown of four different insurance coverages and the types of policies we recommend for clients in high-value communities like Jackson, where natural disaster risks are a serious consideration.
From the Most Basic to the Most Comprehensive:
Actual Cash Value (ACV): The most basic coverage, where reimbursement is calculated after accounting for depreciation. For example, if a fire destroys your $80,000 roof installed in 2005, an ACV policy might pay only $30,000, or whatever its current value is deemed to be. ACV policies are uncommon and generally best avoided.
Replacement Cost: The standard, budget-friendly type of insurance. It will repair or replace your house with similar materials to its original state, without any deduction for depreciation, up to the policy’s specified limit. You can find your current Dwelling Coverage value on the policy’s Declaration Page.
Extended Replacement Cost: Similar to Replacement Cost, but it pays out an additional percentage over your policy’s dwelling coverage limit, such as 25%. After reaching this amount, the insurer pays no more. So, if your policy limit is $1M and the total expense is $1.25M due to inflation, you’re covered.
Guaranteed Replacement Cost (GRC): The most comprehensive level of homeowners insurance coverage, GRC ensures that, regardless of policy limits, your home will be repaired or rebuilt to its original condition—even if rebuilding costs significantly exceed those limits. Whether due to inflation, rising labor costs, or material shortages, a GRC policy will cover the full amount needed to restore your home.
We view Guaranteed Replacement Cost coverage as the Gold Standard policy and recommend that clients seek it out, if available, for several reasons.
First, in many parts of the country, where construction costs are stable and natural disasters are less of a threat, standard Replacement Cost or Extended Replacement Cost policies often provide ample protection. Insurance companies typically adjust dwelling coverage and premiums annually to keep pace with regional inflation rates, helping homeowners feel confident that their coverage aligns with current rebuild costs and that the original valuation remains relevant.
However, it's essential for policyholders to understand that it is their responsibility—not the insurance company's—to ensure the coverage amount accurately reflects current rebuild costs. If construction expenses rise sharply and you haven’t updated your policy accordingly or your estimates were incorrect, any additional costs will fall entirely on you. In high-inflation areas, these coverage gaps can be substantial and extremely costly.
In contrast, with Guaranteed Replacement Cost policies, the onus for accuracy shifts to the insurance companies. In the event of a major claim, they are contractually obligated to cover the full cost of repairs or rebuilding, regardless of the dwelling value stated in the policy. This feature is particularly valuable in markets like Jackson, where home prices and everyday construction costs vary dramatically, like the seasons.
Second, along the same vein, high-value markets like Jackson already contend with a shortage of builders and construction workers, pushing new residential construction costs beyond $1,000 per square foot today. In the event of a natural disaster, such as a major wildfire, these shortages would be further strained, driving building inflation even higher as demand for labor and materials surges while residents rush to rebuild their homes. Replacement Cost policies rarely factor in disaster induced cost spikes and even Extended Cost coverage would be challenged in that type of environment. Only GRC policies provide the peace of mind that you won’t be underinsured, enabling you to focus on recovery rather than finances in the aftermath of a disaster.
Finally - and this is based entirely on personal experience and opinion rather than data - GRC insurers generally provide a higher level of personalized customer service compared to most middle-market insurers. Since purchasing my first house in 2012, I’ve filed very reasonable, straight-down-the-fairway claims under both Replacement Cost and GRC policies. The responsiveness and reimbursement rate were far better with Pure Insurance (my GRC carrier). I suspect that GRC carriers, in serving high value areas and clientele, prioritize a more-attentive and client-focused approach to cultivate and maintain profitable long-term relationships.
The primary drawback of GRC insurance is the higher premiums, though it can be comparable to Extended Replacement Cost coverage. Additionally, according to Tyler Garrow at Meridian Risk Management[1], a New York-based brokerage specializing in GRC policies, only a handful of insurance companies offer this level of coverage. Availability can vary based on location and the insurer’s guidelines; some insurers restrict GRC coverage in high-risk areas, like the Florida coasts, or for homes with exceptionally high replacement costs. Furthermore, most GRC providers cater exclusively to high-value properties, with minimum appraisal requirements often set at $1.5 million in Wyoming, $2 million in East Coast states, and $3 million in Texas and much of metropolitan California.
Meridian works most frequently with GRC providers Chubb, Pure, Berkley One and Cincinnati. According to Tyler, all four are currently writing policies in Wyoming and Jackson, though coverage is case-by-case depending on location and quality of the residence.
In high-value, higher risk areas like Jackson, where wildfires are a reality and building costs can surge unpredictably, securing a comprehensive homeowners policy is critical for peace of mind. At Bootpack, we prioritize Guaranteed Replacement Cost coverage as the gold standard to protect clients from underinsurance, ensure a full rebuild in the event of a disaster, and deliver an enhanced level of service.
[1] I personally use Meridian as my insurance broker and refer Bootpack clients to Tyler almost exclusively due to their exceptional customer service. I/Bootpack does not receive any compensation or benefits for the referrals, other than knowing clients are in good hands.
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