Last time, in part five of our conversation, Farmers Insurance agent Roger Heighton and I discussed whether or not you need extended coverage after filing a claim. Today we’re continuing our conversation by talking about what upgrades are required after you sustain a loss.

For example, if a fire destroyed your property and you were in the process of rebuilding, what upgrades would you be required to make as you rebuilt your home?  Many of the properties in our area were built in the ‘20s, ‘30s, or ‘50s, and what was considered up to code at that time is probably not up to code today. That means you’d have to make some changes, and today we’re going to talk about which ones are necessary.

To get to the heart of this issue, we’ll need to discuss what insurance is for. Insurance, at its root, is meant to put you back to where you were before a loss occurred, not to make you better off. The reason that’s important is that if you go to rebuild a home that was originally built in the 1950s, you’d want to rebuild it the way it was back then. 

The issue here is that California has become very environmentally conscious, which means that certain features are required that weren’t back in the day. For example, things like energy-saving switch features, double-pane glass windows, and fire sprinklers are now required in almost every home. And, beginning in a couple of years, homes will be required to have solar energy panels on the roof.

Be sure to ascertain whether or not your building code upgrade coverage comes on top of your regular coverage.

Here’s where that ties into the purpose of insurance: If insurance is meant to restore your property to where it was instead of improving it, and these additional required features serve to make your home better than it was, then insurance won’t cover these upgrades.

Granted, some of these features are inexpensive, so many home insurance policies have “building code upgrade coverage.” The purpose of this coverage is to provide an extra sum of money to help pay for the costs of these required upgrades. The default amount of this coverage is 10%, but Roger strongly recommends that you pay a few extra dollars to increase that upgrade coverage from 10% to at least 25%.

He also encourages you to be careful about your policy: He’s seen cases in which the upgrade coverage is merely included in the sum that the insurance company gives you to help you rebuild the home, meaning that it doesn’t actually constitute extra money to help with those extra costs. Be sure to ascertain whether or not your building code upgrade coverage comes on top of your regular coverage.

If you have any questions for Roger about this topic or would like to hear more information, reach out to him at [email protected].

For any questions you have concerning real estate in general, don’t hesitate to reach out to me. I’d be glad to hear from you!