CNN
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Tens of thousands of California residents will have to decide whether to move permanently or rebuild their homes after the most destructive wildfires in Los Angeles history.
Insurance companies can cover thousands of dollars in temporary housing and living expenses unless homeowners are underinsured or not covered.
“The policy will generally cover additional living expenses while you are away from home, in order to maintain your usual standard of living,” said Karen Collins, vice president of American Property Casualty Insurance Association Property and Environmental Division.
For example, if a person’s insurance covers $100,000 for a property, the insurance company could cover an additional $20,000 — or 20 percent — in additional living expenses, Collins said.
Peter Vanek, president of PVRK, a real estate consulting firm based in Southern California, said his home was destroyed by a battery fire in 2023. His insurance initially estimated $350,000 for the home. After Vanek provided proof of what was lost, his insurance paid double, including living expenses while he moved, and the house was rebuilt.
Insurance coverage plays a huge role in the decision to move or invest resources in rebuilding. For some policyholders, this might be as simple as having photos of the property before the damage and updating insurers with estimates of the home.
“(Homeowners) might not have disposable income to cover the difference between what their insurance is going to cover and what it will cost them to rebuild their home and replace all their items,” Vanek said.
The current wildfires in Los Angeles County are the the most expensive and the most destructive in its history. Insured losses could exceed $20 billion, according to a report from JPMorgan Chase.
Between 2020 and 2022, insurance companies refused to renew 2.8 million homeowners insurance policies in California, including 531,000 in Los Angeles County, according to data from the California Department of Insurance. Most of these policies were canceled by insurers.
California Department of Insurance Commissioner Ricardo Lara said Thursday that insurance companies must stop any pending non-renewals or cancellations for properties near fires.
“I am working on all fronts to ensure wildfire victims receive the benefits they are entitled to, as quickly as possible,” Lara said in a statement Friday.
Moving is not necessarily easier than rebuilding. Move locally usually costs between $884 and $2,569, according to digital marketplace HomeAdvisor.
Mike Madowitz, senior economist at the Roosevelt Institute, said many of those affected by Hurricane Katrina chose to stay put after being displaced due to the cost and hassle of moving again.
Most residents hit by natural disasters don’t move, said Aaron Terrazas, former chief economist at Glassdoor and senior economist at Zillow. He added that local economies get a boost after natural disasters as residents buy cars, washing machines and other goods as they rebuild.
“But we should have no illusions that this is a meaningful form of growth for the economy,” Terrazas said.
About 18% of the U.S. workforce in 2023 was foreign-born, according to the Bureau of Labor Statistics. And about a quarter of construction workers are immigrant workers, especially in areas like Los Angeles, Terrazas estimated.
Immigrant workers have flocked to places hit by natural disasters, such as New Orleans after Hurricane Katrina and parts of Florida more recently, Terrazas noted. During the recovery period, these workers will be able to work in construction or open small businesses.
President-elect Donald Trump proposed mass deportationswhich could block construction work, Terrazas said.
“Some of these policies are a double whammy for a sector like construction,” he explained. And “it’s not just about work. These are materials.
Imported materials, like appliances, would cost more if Trump taxed them more prices. Lumber, which had high prices due to tariffs from the previous Trump administrationcould become even more expensive and companies could increase their costs as a result, said Madowitz of the Roosevelt Institute.
PVRK’s Vanek said independent contractors and home builders, not large companies, will primarily lead construction efforts in California.
“There is no efficiency in rebuilding a community ravaged by fire,” he said.