The purpose of property insurance is to cover the cost of rebuilding or replacing your property in the event of a loss. Cleaning up after a fire or wind damage is a prerequisite to any future construction. Before any new construction can begin, the burned remains of the previous structure must be removed. Your property insurance policy includes a little amount of coverage for “Debris Removal” in a section that is rarely mentioned.
Until recently, hauling fire debris to a landfill required a backhoe and a couple of dump trucks. However, environmental regulations have altered the way waste is disposed of. It’s not clear if the building has asbestos tile insulation or floor coverings. Was the building used to store any chemicals? Was “hazardous waste” formed as a result of the fire’s intense heat?
As a “additional coverage,” most property insurance policies include the cost of debris cleanup. If a covered cause of loss occurs during the insurance period, the insurer offers to “pay your expenses to remove debris from covered property.”
More than half of all homeowners’ policies cover only 25 percent of the direct physical loss, and 25 percent of the deductible is included in that figure. As an example, a $1,000 deductible would allow for $12,750 (25 percent of $50,000) in debris removal costs for a paid loss of that amount.
Debris removal can be covered by an additional $10,000 per occurrence under the policy’s “limits of insurance” section if this amount isn’t sufficient or if the total value of direct physical loss plus debris removal exceeds the applicable insurance limit.
A quarter of the direct loss is covered by the policy. However, since the insurance policy’s limit has already been spent on the building‘s replacement, there is no money remaining for debris disposal. The $10,000 additional coverage provision will leave $15,000 uninsured.
Additional insurance policies can be acquired to cover the costs of debris cleanup. In many circumstances, additional debris removal coverage can be added at no additional expense to the insurance buyer during policy discussions. It is common for insurers to offer the option of adding on additional coverage through the use of an endorsement. All you have to do is ask, isn’t it?
Costs related to regulations and ordinances that potentially affect the reconstruction of this structure should also be taken into account. Reconstruction of “nonconforming uses” structures is typically prohibited by local zoning laws. If this is the case, consideration should be given to the possibility of demolishing unaffected areas of buildings. Another factor to consider when deciding how much insurance to purchase is the expense of construction in a different area.
Insuring your home involves much more than just deciding on the appropriate level of protection. You need a thorough investigation if you want to get it right.
