CHRISTINE: I’m Christine Cyr Clisset and you’re listening to The Wirecutter Show.
CHRISTINE: Hey, it’s Christine. If you listen to the show regularly, you know that we occasionally talk about emergency preparation. This is a longstanding and important part of Wirecutter’s coverage, especially as climate change is making extreme weather events more frequent and more intense, In this episode, we’re discussing something you might not even consider part of emergency prep, but if you own a home or you aspire to, you really should: Homeowner’s insurance.
Back in January, we did a three-part series about recovery after the LA wildfires. I interviewed two Wirecutter writers whose homes were either destroyed or severely damaged by the fires. A big theme of that series is how crucial it is to have enough coverage and to know what’s covered under your insurance policy ahead of a disaster.
Today, I’m going to speak with Gregory Hahn, one of the LA writers we featured in January whose home was damaged by the Eaton Fire. This has given him a very intimate experience with how crucial adequate home insurance is in the aftermath of a disaster. And he just wrote a guide to buying home insurance for Wirecutter. Gregory’s going to walk us through the questions you should ask to help make the process less murky, whether you’re buying a new policy or renewing an old one. The tips we’ll discuss are relevant for any homeowner or even renters.
Welcome back to the show, Gregory.
GREGORY: Thanks for having me.
CHRISTINE: It’s really nice to have you back. We had you on the show last January to talk about the LA Wildfire Recovery. Today we are going to talk about homeowner’s insurance and how that connects to emergency prep. But I got to say, I feel bad because we keep having you on the show for very serious topics and you in your full-time job are more of a design and lifestyle and tech writer, and you have done amazing pieces for Dwell and Wirecutter and all these other publications, so I hope we can have you on for a funner topic next time, okay?
GREGORY: I hope so too.
CHRISTINE: All right. So I want to start with a foundational question about homeowner’s insurance. And maybe we can compare this to an insurance that many, many people have: health insurance. We know that this is there to cover both small things and big things. So when we’re thinking about homeowner’s insurance, define really what home insurance is there for. Why do we have it?
GREGORY: That’s a great example, comparing it to health insurance, because basically home insurance is health insurance for your home. So it covers the things that are visible on the outside, also on the inside, but also the possessions that occupy your home. So there are small and big accidents that happened a while back ago. We had a bear tear through our yard.
CHRISTINE: I saw that on your Instagram. It was so wild.
GREGORY: It was literally wild watching this bear tear our fence down. And so after that happened, we immediately contacted our agent and said, “Hey, this has happened. This is the damage.” And he gave us an assessment of what that would mean making a claim. And then that scaled all the way up to making claims for a post-wildfire recovery. And so home insurance is exactly what you said, it’s for the small things, but it’s also the catastrophic things to cover those costs that you would not be able to immediately secure or maybe you could secure, but would leave you in financial dire situation circumstances.
CHRISTINE: In the article, you talk about how the process of purchasing and navigating home insurance is confusing by design. So I want you to explain what you mean by that.
GREGORY: Home insurance policies are riddled with acronyms and industry terminology. That makes it very hard for somebody who hasn’t gone through these things to understand what anything means. So there’s actual cash value, so ACV, versus replacement cost value, which is RCV. And something that became really important was ALE, additional living expenses.
CHRISTINE: I remember we talked about that in January when we did our January episodes.
GREGORY: Yeah. And that’s the additional living expenses that allowed us when we were displaced to have funds to pay for rent. And so without knowing that terminology, you don’t know what to ask and how to ask for it.
CHRISTINE: And especially if you’re a first-time home buyer or you’ve never gone through a big claims process, all of those acronyms might just be gobbledygook for most people, right?
GREGORY: It feels straightforward when something is a small claim versus a large claim, and then you feel like the information’s obscured and you’re penalized for not knowing those things.
CHRISTINE: What do you think is the biggest thing that people get wrong about homeowner’s insurance or the thing that people overlook when they’re going out to buy it?
GREGORY: I think the biggest misconception is that if you have home insurance, that you are going to assume that you’re going to be made whole after a catastrophic event. There are often gaps in the coverage that people don’t think about. Water sewage backup is a common one. Another friend said that they ran their business, they had a home office and their policy did not cover their home business. And so they lost all their equipment or will have to pay out of pocket, which was something now that they’re very aware of. There are certain disaster events that are not covered by a regular home insurance policy, HO-3. So those details are very common blind spots.
CHRISTINE: Obviously, depending on where you live, you may have higher risk factors. You live in LA, so you’ve got earthquakes and fires. Someone elsewhere might be in a higher flood risk. How do you advise people after having gone through this personally, the fires, dealt with your insurance company, but also having done all this reporting and research for this piece you just wrote, how would you advise people to think about how to assess the extra coverage that they might need?
GREGORY: Prepare for the worst. So know which natural disaster might befall you in a way that might leave you struggling. The other thing that I learned after the fact was understand the structure of your home from that perspective, what may get damaged and how there are aspects of older homes, especially the details aren’t off-the-shelf repairs. Having that assessment is very important. And then interior-wise, your possessions, know if you have artworks or collectibles or special equipment, maybe have a really great stereo system or something. Get that appraised and covered, document it through photos and videos so that you’re just ready. Getting proper coverage is a lot of preparation.
CHRISTINE: We talked back in January about how many Americans are underinsured – meaning the policy they have would not cover the full amount of rebuilding if their home were to be severely damaged or destroyed.
We also know, thanks to some great reporting from the San Francisco Chronicle, that some of the algorithms insurance companies use to estimate rebuilding costs aren’t totally accurate.
Given these things… how would you advise someone, whether they’re shopping for a new policy or renewing an existing one, to make sure they have enough coverage?
GREGORY: It goes back to understanding your policy in detail so the number one thing to do is go speak to an agent, whether it’s an existing agent or possible new insurer, and have them explain it to you all the details like the newbie that you are. Nobody walks in as an expert. There’s no dumb questions with your policy. But even before you go in, maybe use a real estate site like Zillow or Redfin. Those give you a view of the land of… It’s similar to using comps while shopping for a home. So you’re just understanding what’s the going rate for homes in your neighborhood and what’s the details within the homes that might be analogous to what your home is like. So staying informed of the real estate market is very important to not just when you buy insurance policy, but when you renew it and that you speak to your agent.
CHRISTINE: Yeah, I was going to say that seems like it might be very helpful for people who maybe bought a home 20 years ago and real estate prices have greatly increased since then.
GREGORY: Yeah, and that happened specifically in Altadena in our neighborhood because we had a lot of unique and historic homes. And so a regular home policy that just kind of blankets over it doesn’t really take into account unique architectural historic details. And so in those circumstances, those weren’t additional coverage. And speaking with an agent or working with a professional home appraiser beforehand may give you that information so that when you fill out your policy, it will include those details.
CHRISTINE: So what can a home appraiser do for you in terms of helping you understand the true cost of rebuilding a structure that you’re buying?
GREGORY: Their whole job is to look at homes in a way that will give you an accurate assessment of the value of your home. They look at your home with a level of detail that you might not even look at your home. They may look at structural elements. They’ll look at architectural details that can’t be reproduced easily. They will look at problem areas. They will look at what type of foundation you have, what type of roof you have, the condition of everything in a way that will inform your insurer when you make those claims that it will really take into account the costs.
CHRISTINE: So I think there is an obvious tension for a lot of homeowners, new home buyers, especially now people already are dealing with overwhelming mortgages. On top of that, you need to pay for your home insurance. So people are trying to keep their premiums lower because you’re facing so many expenses, but obviously getting more coverage to cover potential disasters will probably cost you more per month. So how do you balance that tension? Are there ways to get enough insurance while keeping your premiums lower?
GREGORY: One of the first things that we did with our first policy was that we asked if there was any discounts, and immediately the lowest hanging fruit is to bundle your home insurance policy with your auto insurance. It’ll bring down costs. I think ours was like 20% lower. There are other discounts that are often available. If you’re a long-time customer, there’s something called loyalty discounts. If you’re a long-time homeowner, you haven’t made a claim with an insurer, they can give you a discount. In our case, we fire-hardened our home and then we ask for a discount too. We got a very, very modest amount shaved off.
CHRISTINE: So is the best course of action there to just ask your insurance agent, “What kind of discounts are available? What could I do to lower my rate?”
GREGORY: Yeah. As somebody who is pretty shy about asking for things sometimes it’s really important to be forward and say, “Hey, how can you help me with this price?”
CHRISTINE: And you mentioned earlier you might get a discount if you have never made a claim. So what happens if you do make a claim? Are you going to risk increasing your premium?
GREGORY: It’s usually the second or third claim of a larger size that might result in check marks against renewals. It varies between insurers, if you make those multiple claims.
CHRISTINE: Right. So it’s balancing what is worth making a claim, what you can just pay for out of pocket to keep from having some kind of increase to your insurance premiums.
GREGORY: Yes.
CHRISTINE: Ok, so it seems like the most important takeaway here is that when you’re buying home insurance – or renewing a policy – you need to do the work of making sure you actually have enough coverage. Talk to your agent, assess your home, know the disasters most likely to happen in your area, and make sure any special coverage options you need are included in what you get.
And ask about discounts to your premiums. You never know what might be available, especially if you can bundle home and auto or things like that.
We are going to take a quick break. And when we’re back, Gregory, we’re going to talk about some ways that you used AI chatbots to help navigate this insurance process and how listeners can do the same. We’ll be right back.
CHRISTINE: We’re back. Gregory, we talked about some of the big picture things to know when buying or renewing homeowner’s insurance. Now I want to get into some of the more nuanced things that people should know when shopping. So first I want you to tell me what are the pros and cons of going with a huge national company like Allstate or State Farm, which is sort of the scenario you went with, versus going with a regional or local carrier? What’s your advice here?
GREGORY: From my personal experience, the biggest thing I noticed going with a large national company was the response scales in accordance to the size of the disaster. So our insurer came out within a few days. They set up an emergency disaster response tent to speak and help with policy holders. I didn’t see any other insurer do that. On the other hand, a local carrier, they would have better grasp of the specifics of regional disaster. They would know what kind of homes exist in those neighborhoods and they would go beyond the data.
CHRISTINE: I have read about these sort of nightmare scenarios where someone owns a home and their insurance company just drops them. What should someone keep in mind when they are shopping for insurance about dropped policies, non-renewal, canceled policies?
GREGORY: A lot of this confusion of what happens can be cleared up a little bit by talking to a human being, talking to an agent, and asking them, “What can I do to avoid or reduce the chances of non-renewal being dropped in the future?” And they can give you advice specific to your region, specific to your home like, “Hey, your roof needs to be replaced. It’s got damage in this corner next to the fireplace and that’s a concern.” They’ll point out those things.
The other thing I advise is just to speak with your neighbors. If you want a conversation to go from zero to 60, ask about home insurance. It’s like people want to talk about their home insurance if they’re homeowner. They will reveal instances where they were dropped or whether they made an improvement and got a rate secured or lowered even.
CHRISTINE: Earlier in the conversation you mentioned these two terms that people will see in their insurance policy, replacement cost value and actual cash value. What is the distinction between those two? What should people be asking about those terms when they’re shopping for insurance?
GREGORY: Yeah, here we are with the acronyms. And replacement cost value, RCV, it basically says they will pay for a new replacement of what you’ve lost. Actual cash value pays what the old one was worth factoring in depreciation. So for example, post-fire, there was a sterio speaker that I paid $1,500 brand new, but it was eight years old. So under our policy, the replacement cost value, the insurer would pay the full $1,500, enough to buy a new one. But if I had a policy that was only ACV, they would factor in depreciation.
CHRISTINE: Meaning $1,500 that you spent years ago, they’d take off a certain amount for each year?
GREGORY: Yeah. There’s a formula that they would share and say like, “We are going to take off 10% per year.” It’s really determined also by the item itself. Something like clothing, shoes, the depreciation is much more severe versus something that may age gracefully.
CHRISTINE: And ideally, so if you’re shopping for insurance, it’s better to get replacement cost value rather than the actual cash value?
GREGORY: Absolutely. Yeah.
CHRISTINE: I have been waiting for this question because it’s about AI and everybody wants to talk about AI right now and we want to jump on the bandwagon. But you have these great prompts in the piece that you just published around ways that you can ask different AI chatbots questions about your insurance policy or how to shop in your area. Tell me about how you used AI in terms of the claims process that you’ve been dealing with since the Eaton Fire.
GREGORY: It’s funny because I recently realized I used the AI agent in the same way that I used to devise a weekly workout routine. So I basically plugged in my age, fitness level, my goals, how many days of rest versus activity I wanted, the equipment that I owned. And then I asked the AI agent to create with specificity and citations a good workout schedule. I think that’s how you want to approach using AI for the fitness of your home, your home insurance. So once I got my hands on our policy after we were displaced, first thing I did is I stripped out my personal information and then uploaded my policy and then I started creating a conversation with the chatbot of informing me what is covered and what wasn’t covered before jumping on the phone with our agents.
So I think the prompt that I used was like, “Explain ALE in plain language and flag anything that looks like we might be missing under these circumstances.” Then I started thinking of new things to ask.
CHRISTINE: Can I ask, I think the common thing anybody who has used AI to probe into something important like this, whether it’s insurance or health questions, is that it’s not always a reliable narrator. It sometimes spits out things that are inaccurate, wrong, or are making the wrong connections. So how would you advise people if they are going to use an AI chatbot, if they have questions about insurance, if they have questions about the policy that they’re being offered, what would you advise them to do just to make sure that the information is accurate?
GREGORY: That’s why I had mentioned asking right off the bat to include citations and then following those links to double, triple-check. And then you might have some responses from AI. I always check with my agent if it’s true. So have that conversation.
CHRISTINE: If someone is renewing their insurance, so they’re listening to this, maybe they’ve owned their home for a decade, five years, 20 years, maybe 50 years, will they automatically be insured for the amount that their home would cost to rebuild? Or is this something that when you’re going to renew, you should be doing some of the same stuff that you talked about earlier, like making sure you’re looking at comps of what things actually are selling for in your neighborhood. Should you have an appraiser come if you got your original policy a long time ago, just to make sure that you are insured for an amount that it would actually cover rebuilding?
GREGORY: Yeah, that’s definitely the best advice is to make it something maybe every year is ideal, but at the least every two, three years. Review your home yourself. I feel like after the fire, I’m looking at our home much more holistically. I’m seeing how everything’s connected, how damage to one thing can affect another. So yeah, you want to be aware of not just your home, but also the surrounding neighborhood and how things have changed. When you’re renewing, maybe you’re much more aware of the idiosyncrasies of your home and you can ask specific questions.
CHRISTINE: And don’t be passive. Be active.
GREGORY: Don’t be passive. Yeah.
CHRISTINE: Understand what your home is worth and make sure you’re getting enough to cover it.
GREGORY: Yeah. It’s better to be overinsured than underinsured.
CHRISTINE: So we have obviously been talking about homeowner’s insurance for most of this episode. I’m wondering if there are any takeaways for renters in all of this.
GREGORY: Renters should focus on knowing whether their policy includes additional living expenses so that if they’re displaced, that they have the money, the funds to rent another place. As somebody who rented for most of his life, I know what it means. A couple hundred dollars a month can mean make it or break it. And so yeah, having a policy that includes sufficient ALE is vital.
CHRISTINE: Well, Gregory, this has been super informative. Thanks for joining.
GREGORY: Thank you.
CHRISTINE: Gregory’s big advice here is:
Have conversations. Talk to your agent and talk to your neighbors, especially if you’re concerned about being dropped by your insurance company.
Look for policies that have RCV (Replacement Cost Value) instead of ACV (actual cash value) when possible. And make sure there are sufficient ALE (Additional Living Expenses) included.
If you need help with all of this – which many of us do! – consider using AI as a tool to help you understand your policy. But ask for citations, and double check with your agent.
If you want an even more granular breakdown of the questions to ask, the terms to know, and the things to think through when shopping for or renewing homeowner’s insurance, check out Gregory’s piece. We’ll drop a link in the show notes. We will also share links to the series we published in January, The True Cost of Recovering from the LA Wildfires. They’re great episodes that go into Gregory’s personal story of experiencing the fires.
That’s it till next time. Thanks for listening.
The Wirecutter Show is executive produced by Rosie Guerin and produced by Abigail Keel, engineering support from Maddy Massiello and Nick Pitman. Today’s episode was mixed by Kathryn Anderson. Original music by Dan Powell, Marion Lozano, Rowan Niemisto, Kathryn Anderson, and Diane Wong. Cliff Levy is Wirecutter’s deputy publisher and general manager. Ben Freeman is Wirecutter’s editor-in-chief. I’m Christine Cyr Clisset. Thanks for listening.
