Podcast Episode - Ask KT & Suze Anything: Navigating Your Insurance, After a Disaster

As a continuation from the last episode, Suze answers your questions related to navigating insurance after a natural disaster.  Learn more about the correct questions to ask your insurance agent, why the insurance company pays your mortgage company instead of you directly, how long you have to rebuild and so much more.

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Podcast Transcript:

Suze: January 16, 2025. Welcome everybody to the Women and Money podcast as well as everybody smart, smart, smart enough to listen. What's today, KT?

KT: Ask KT and Suze, anything

Suze: and everything,

KT: anything. But today's also a really special day.

Suze: Why's that?

KT: Well, I'm just gonna kind of set the stage here for one of our listeners.

KT: So I get an email that says she is an amazing woman. I have had the pleasure of being her friend for 40 years and her husband for 32 of those 40 years. Now Suze, who do you think that's from?

Suze: I have no idea, right? So tell me, who's it from? KT

KT: It's from Michael.

Suze: Yeah, what does Michael want?

KT: No, Michael wants us to know that today is a really special day,

Suze: All right, and today, so KT just handed me his email, right? And, and I'm reading this, and it's like, ah, Janet.

Suze: Janet, the queen of the day, because why it...

KT: Michael loves you.

Suze: Michael loves you. Michael loves you so much that he got us to want to wish you a happy fifty-fourth birthday.

KT: Suze's favorite number.

Suze: It is. It adds up to a 9, and this is a 2025, so this is a 9 year. And 9 in both Eastern and Western cultures is material and spiritual abundance. So Janet, you're a 54, that's a 9. This is a 9 year girlfriend. You're going to have a great year with that husband of yours.

KT: Happy birthday, Janet.

Suze: Yeah, sweetheart, happy, happy birthday. All right.

KT: All right. So let's get started, Suze, because this is also a continuation of Sunday. We received so many emails from people listening to Sunday's podcast which really addressed insurance, the what ifs of life, everything that one needs to do to prepare for in the event that you were part of the LA fires or...

Suze: ...any catastrophe.

KT: Any kind of, you know, situation like that.

KT: So I'm going to start with Samantha. She said, Suze, on Sunday's emotional podcast, you asked us to look at our insurance policies, and I did. Now I have an appointment with my agent that truthfully I haven't spoken with in 7 years. Can you just briefly tell me what I'm looking for in the policy, Suze? I feel like I'm in grammar school all over again learning the alphabet. But I just want to be a little knowledgeable when I talk to him. So what can you tell her? What can you tell Samantha?

Suze: So KT, do you know why she feels like she's learning the alphabet all over again?

KT: Yeah, because she doesn't know what's in her policy.

Suze: But why the alphabet? Why'd she call it the alphabet? You don't know either, do you?

KT: ABC.

Suze: ABC. What's ABC?

KT: A B C D.

Suze: Don't fake it with me, Travis. Don't fake it with me. I know when you don't know. And that was your quizzy. Anyway, you should see her face. Everybody listen to me.

Suze: It's important that you know how to read your policies, and they have different coverages, and they actually call those coverages KT coverage A, coverage B, coverage C, coverage D, coverage E, coverage F, and so forth. All right. The most important of all your coverages, everybody, is coverage A. And that's known as the dwelling coverage. How much is your structure to your home worth, and that will include everything the walls, the roofs, the foundations, the built-in appliances, all of those things. And coverage A is what is covering fire, windstorm, hail, and those types of perils, and a peril is what's happening right now. The fire is a peril.

Suze: However, you have to know that many of the other coverages everybody is based on what coverage A happens to be. So if you have an amount of coverage A, then possibly your other coverages will be a percentage of what that amount happens to be. Also, just know that the limits for coverage, they're really based on the rebuild of your home, not what the market value happens to be, just so you know. Next,

Suze: Coverage B is other structures and coverages, which means all right, let's say you have something that's not attached to your home,

KT: Like a garage.

Suze: Like a garage possibly, but it has to be a detached garage. Maybe it's a fence or a shed or your gazebo or things like that and usually everybody coverage B is limited to 10% of the dwelling coverage amount. So I want everybody to understand this KT. So if coverage A, just let's say, is a million dollars, just let's say that's true, then the other structures on your property might be limited to 10% of coverage A, which would be just $100,000.

Suze: So you need to take all of that into consideration, Samantha, when you are looking at your policies. The other most important one really, KT is coverage C, which is personal property coverage. That's what covers your loss of your clothes, your furniture, your electronics, all those kinds of things, even appliances in certain circumstances...

KT: Artwork, things like that.

Suze: Well, no, not artwork, right, but personal property. Now you could have other things that would cover your artwork, but usually in personal property coverage it's not artwork.

Suze: However, though high value items such as art KT for instance that you just said or your jewelry or collect or or collect...

KT: Collectibles

Suze: Or thank you KT, say it again for me.

KT: Collectibles.

Suze: Oh, see why I need her, everybody may have sub-limits just so you know, maybe have less where they're they're not insured as much unless they're scheduled separately.

KT: All right, so wait, wait, wait, so let me just ask one. So if...

Suze: Now there's one more that's really important. There really is that everybody really does need to know, and there's actually 3 or 4 more, but the next one, the fourth one. And this is what's going to come into play for most people right now, KT is loss of use or additional living expenses, and that's known really as coverage D. And what that covers, which is what all of you need to make sure that you have in your policy is the expenses that you're going to incur when you can't live in your home anymore due to the coverage damage such as this fire that's happening, so it will cover things for you such as your hotel bills, your meals, your transportation, but you have to know that it's limited to 20 to 30% of the dwelling coverage again. 

Suze: So do you understand everybody how it always goes back to coverage A? If you are listed as a million dollars for your home, then the most you're going to get in additional living expenses coverage D will be 200 to $300,000 which is 20 to 30% of coverage A. Just briefly, everybody, and you need to have your Suze notebooks out for this. KT, I wasn't expecting such a detailed question to begin this whole thing, but you just, you just set me up didn't you?

KT: I didn't know either. No, I'm clueless as well.

Suze: All right, so besides coverage D, just briefly, there's coverage E, which is personal liability coverage. So if somebody's injured on your property, coverage F is medical payments to others. But here's what's important for everybody, especially right now in LA, or that when they suffer a loss like this.

Suze: Part of your policy, everybody has endorsements, and there's one for debris removal, very, very important. Are you seeing all of those videos and TV coverage of all the debris? It's going to take them 9 months to clean up all of the debris that the fire left. So you have to know that you have debris removal. You have, let me think what else there would be. You'd need tree and shrub damage is it going to cover your policy, the damage for your trees and your shrubs, and what about building code upgrades? Remember these people now KT in LA, they're probably gonna have to rebuild, but when they rebuild, the ordinances are gonna be, you have to be even more strict.

Suze: You have to build with special materials and things like that, and that may bring up the cost of their current building during those repairs. So does your policy cover that food spoilage, identity theft protection, and all of those things you really have to know, however, what your policy excludes, and most policies exclude flooding, earthquakes, mold, and neglect things like that. So those are just a few things that answer this question.

KT: So Suze, what's the one thing Samantha should be looking for?

Suze: Well...

KT: The just one thing in her policy before she speaks to the agent.

Suze: So Samantha, now that we did the entire podcast just on your question, maybe we'll go longer today, but I wanted to be thorough that all of you knew how your policies are created for you and what you should know about them is that KT, there are two ways for coverage A her dwelling coverage.

Suze: And is it going to be replacement value or an accrued cash value policy?

KT: Who gets to choose?

Suze: She does. A replacement value means that they are going to replace it for whatever it costs for her to rebuild it. The actual cash value is they're not going to pay you for what it costs you to rebuild it. They're going to take whatever your value was, depreciate it. Let's say it was a million dollar home that you bought years ago, maybe now the actual cash value, they're only going to give you a $600,000. Remember, everybody, they're not going to pay you the market value of your home, what it was worth.

Suze: Usually your insurance policy is based on what it would cost to rebuild, and if you only have actual cash value, you're only going to get that amount minus depreciation of what you, how long you owned it.

KT: It's not very fair, is it?

Suze: It's fair because you can get replacement value. It's just gonna cost you more. So the most important thing, Samantha, I would be looking at if I were you, I would have a replacement value policy number one and I would make sure that I had building code upgrades that go along with it. Because if you need to rebuild, you're in the fire and the upgrades are more expensive, you need to know that your insurance company will pay for it.

KT: All right, so this next one confused me a little because I never heard of it before. It's from Josh. He said, Suze, I live in San Diego. I tried everywhere to get insurance and no one will insure me. My mortgage company told me to apply for FAIR Insurance, FAIR, so I was just curious, is that a company or is it a kind of insurance?

Suze: It's a, it's a,

KT: it said, can you tell me what is the max FAIR will insure my home for if it's worth $2 million.

Suze: So great question. First of all, fair, I can't say it.

KT: Say fair.

Suze: Fair.

KT: Yeah, that's it.

Suze: Not - don't say "fear" say "fair"

KT: Fair,

Suze: Fair,

KT: fair. OK, good. So she has a speech impediment, everyone, and when she says fair, it comes out fear.

Suze: Yeah, I don't want to be fear now. I want to be fair, yes, fair, fair. OK, so FAIR stands for California FAIR plan.

Suze: It's the California's plan, and many states have this, by the way, KT.

KT: All called FAIR?

Suze: Yes, but...

Suze: Oh, here we go. Here she goes.

KT: It's not funny.

Suze: So why are you laughing?

KT: Because you can't say it. It's not funny. OK, so many states have FAIR.

Suze: Yeah, but I can't say it, but I sure know what it is. And would I rather know what it is than be able to say it?

KT: Tell us what does it mean.

Suze: It means fair access to insurance requirements. Now what's interesting is that many of the insurance companies, and you all know this, have actually left California. They're not insuring you anymore, especially if you live in a wildfire area or whatever it may be. In Florida they have pulled out of Florida if you live near a flood zone or if you're in a hurricane area like KT and myself. Again, I use this as an example. We have a 2100 square foot condo on the ocean that's not that big, everybody. Our insurance is $28,000 because we're on the second floor. $28,000 a year. Are you kidding me?

KT: What What if we were on the first floor?

Suze: It would be probably $35,000 a year, uh huh, crazy, crazy, right? Absolutely nuts anyway. So this happened many, many years ago as insurance companies started to pull out, where the states all got together and this fair plan serves as the state's insurer what they call of last resort providing basic property insurance to homeowners, so providing that you cannot get insurance to your home through any other insurance company, you know this was established KT all the way back in 1968 if I'm not wrong, and it's a pool of insurers that get together and then they're allowed to resell it. It's this whole thing. But anyway, when you cannot get an insurance policy through any legitimate insurance company, if there is such a thing, I'm sorry to say, but if you can't.

Suze: Then you have to go to the FAIR group and then you're in a pool of all insurers. What was his question about the $2 million his house is worth? How much?

KT: It said, can you tell me what is the max FAIR will insure my home for if it's worth 2 million dollars?

Suze: They will insure you, right, but the maximum they will insure is for $3 million. Now you all have to remember with this kind of insurance, the premiums are extremely expensive. The insurance is not that good. Remember just a little bit ago I talked about additional living expenses. Normally this insurance does not cover additional living expenses. I think some of the policies depending on the state will allow you to purchase additional living expenses, but it doesn't automatically come with it.

KT: So you're almost forced to... You know, abide by their rules and regulations. FAIR is your last resort.

Suze: Which is why it's kind of funny that that's what it's called FAIR, I know, but you need to know, listen, at the beginning of this year, in 2025, the FAIR insurance in California had already insured $6 billion of exposure in the Pacific Palisades alone, and so it may be possible that their potential losses there can be as high as $24 billion so.

Suze: It's just kind of interesting, but if it's all you can get, you need to get it, you know, I was listening the other day to the TV and Governor Newsom, his dad had to get insurance with FAIR and even he said on the air. It's expensive and not that good, but it's the insurance of last resort. All right.

KT: It's your only chance.

Suze: I just have to then add one thing to the FAIR question. If they won't automatically give you ALE, which is additional living expenses, which you need, then on your own, everybody, you can purchase what's called a DIC policy.

Suze: Make my head explode. All right, KT, which is a difference in conditions policy which will include ALE coverage.

KT: Where do you get that?

Suze: Well, you would get that through a regular insurance company, and there you go.

KT: All right, it's so confusing. All right, let's go to Maxine. My mom, who is in her early 90s, lost her home in the fire. She bought it about 50 years ago and is the only home she's known.

KT: So she said she has listened to you for years and learned from the Suze Orman show to properly insure her home, and she followed your advice to the T. So we are covered there. However, she asked me to ask you if she rebuilds her home, will she still be under Prop 13? I thought this was a great question, everybody, let me, let me finish.

KT: She said she saw on TV how one person lost their home in the neighborhood and said that all the property taxes and insurance will be going up after the rebuild. So now she's so upset that she may lose her Prop 13 advantages, and that's why she was able to stay in the house. What can she do, Suze? You're the only one she'll listen to. Oh. 90s. She's in her 90s. So first, tell everyone what is Prop 13. Just briefly, they never heard of it.

Suze: How do you know I know? I know because my house is covered in 1975 to be exact, because I owned a home in California at the time. Proposition 13 was passed which stated that you would only have to pay 1% of the value for property taxes, and it could never go up more than 2% a year based on that figure. That's what Prop 13 is. Maxine, I have to tell you, I heard that same person that you did say that and I was like taking my hands and I was doing this with it. What was this KT?

KT: She's she's holding her head shaking it.

Suze: I'm like, no, don't tell these people that they're going to be worrying and obviously Maxine, you saw it as well as I did.

KT: Her mom saw it.

Suze: Now first you have to know if you rebuild your home, listen to me closely, Maxine. If you rebuild your home, on the same property and due to the damage that happened by a natural disaster, which it has, California law will allow you to retain your original Prop 13 tax basis.

KT: So now her mom's gonna be really happy.

Suze: However, you cannot rebuild your property and make it substantially bigger. It's got to be equivalent in size.

KT: Keep the footprint.

Suze: So keep your footprint. However, listen to me, Maxine, if you decide not to rebuild on the same property because everything has been destroyed around you and what are you gonna do there? There are no utilities, there's nothing and you decide not to rebuild there and you decide you want to buy a replacement home elsewhere.

Suze: You can also transfer Prop 13 tax bases to your new property under what's called Prop 18, but you must build or replace your home within 2 years of the loss of your original home. So just remember I said that and your new home must be of equal or lesser value just so you know.

KT: But it can be elsewhere, correct?

Suze: It can be elsewhere.

KT: All right, that's important,

Suze: But that's under Prop 19.

KT: All right...

Suze: Which replaced Prop 60 and 90 in 2021, but you don't care about that, do you?

KT: No, no, no, but let me finish asking one more question about this. What about someone that had a huge home and they paid $100 or even $200,000 a year in property taxes and now their home's gone? What do they do? And do they get refunds on the what taxes they've already paid?

Suze: Yeah, remember.

KT: So what happens there?

Suze: Is that when your house has totally burnt down everybody. You still have to pay property tax on the land. Listen to me closely now. The house is no longer there. So if this person was paying $200,000 a year in property tax, which is absolutely possible in California, they no longer have to pay it on the home because the home isn't there.

Suze: So you should all apply to what's called the misfortune or calamity program, and you have to look that up. I think you can find it by the way, if you go to the assessor's office at your LA what would it be logically it would be assessor.lacounty.gov. That's probably where it's at.

Suze: And you could apply there for your property taxes to be deferred without any penalty or interest number one and just know that there will be an adjustment. Now you have to understand that you're going to have some adjustment the value of the land may be worth something, so you might have to pay property taxes just on that, but if you do what I just told you, it is probable that they will defer all of your taxes until everything settles down.

KT: But let me ask another question. I'm just curious if you already paid your taxes, your house burns down, and you still have taxes on the land, you get a refund.

Suze: So if you already prepaid your taxes, KT and I prepay our taxes, and usually if you prepay your taxes for the year, you get like a 10% or something discount. If you have already paid your taxes, let's say $200,000 they will refund it to you even if you pay it month by month. If you paid it for January already, they will refund your property taxes for you. But even if you still owe what you will, property taxes on your land that's empty. They will probably defer the property tax on that land if you look for the misfortune or calamity program. Just that simple. Next, KT.

KT: OK, this is from Gina. She said my twin brother was staying at an AirBnB. He had to evacuate and as he was driving his car was stuck in traffic while everyone was evacuating and he had to abandon it. He had to leave that he's one of these guys who had to leave the car in the mess there. He got everything out and totally loaded his car with clothes, everything. He just found out it was lost to the fire, so the car is completely destroyed as well. He told me he only had liability insurance on his car, but it was a really old car. I told him not to worry. His insurance will take care of it. So now Gina is asking Suze, did I tell him correctly?

Suze: (Suze makes the wrong answer sound)

KT: She didn't.

Suze: Now listen, your car insurance, for it to take care of the car, would have to have comprehensive insurance on it, and that would take care of the car and the contents, the contents, KT usually are taken care of by your home insurance or your renter's insurance. Now I'm not sure if he has those things. He might not own a home. I don't know, but his car itself, it is not insured because liability is not comprehensive, so yeah, it's comprehensive that will pay for damages that are caused by non-collision events, KT such as fires, floods, thefts, or vandalism.

Suze: Now let's just say if any of you have a car that was in your garage or near your home and the fire caused damage to both the house and the car, your homeowner's insurance would cover the house and its contents, excluding the car while your auto would be covered by your auto insurance if you have comprehensive. If you have something inside the car, that's house insurance. All right, next.

KT: OK, it gets so confusing.

Suze: This is that's why this is good. It's a podcast.

KT: So next is from, um, Lila. She said, Suze, who pays for all the debris removal that's covered by insurance?

Suze: So if it's covered by insurance, all right, if you have removal of debris insurance, which I talked about briefly with Samantha in our first question, then your insurance policy will cover it. If you don't, then you're gonna have to pay for it out of your own pocket.

Suze: All right, but you know, KT, I just want to tell you something with debris removal is that be very careful, everybody, I'll never forget during the Oakland fires when a lot of my friend's house turned to ash. And they'd be out there and somebody would come up and say I can remove all of this debris. It will be $1000 or whatever it was going to be and if you just pay me directly and then give this to the insurance company, they'll cover it and a lot of people did that. And it wasn't legit, so do not pay any contractor or anybody who's offering to do anything unless it is cleared by your insurance company. Do you hear me? OK, go on KT.

KT: So this one, this one is just called Frustrated. No name, I just got frustrated. I heard your podcast last Sunday.

KT: And the question I have is, why does the mortgage company receive my insurance payout? That just isn't right, Suze. I live in Sonoma, which is an area that has fire, so how can I make it so that if my house does burn down, the insurance company pays me?

Suze: Own your house outright. That's the only way. That is the only way. Because listen to me frustrated, your mortgage company has an interest in your property. You're able to own that property because they lent you the money to do so, so they are one of the first pays on that policy because they have a stake in it. It's collateral for the loan.

Suze: So to protect their interest, they are required to have their name as a loss payee like I just said on the insurance policy. Now the lender, the reason it goes to them is that they want to ensure that the insurance money is used to either repair or rebuild your property or pay down the mortgage balance. So that's why and that's how it works.

KT: All right, all right, this next one from Pablo, I think you already answered, but let's just go through it one more time for those of us that forgot. Pablo said, Suze, my aunt has FAIR insurance plan and lost her home. Does she have to rebuild on the same lot, same footprint, right?

Suze: No, under the California Fair plan, you're not required to rebuild on the same lot if your home is destroyed. However, make sure your aunt checks her policy because it's really dependent on what she signed up for and what she is covered for and what restrictions may be imposed by her mortgage lender. All right, next, KT.

KT: All right, so Suze, so JJ wants to know, do we have to continue to pay our insurance policy premiums and utilities even if our house is destroyed or gone? I also have outstanding bills I owe for cable, internet, etc. Any advice on if I have to pay them, like what does he do?

Suze: Yeah, so the very first thing you all need to understand is that you have to keep paying your insurance policy.

Suze: And the reason that is, is that they're the ones who are covering you for this loss. If you stop paying them, then your coverage will no longer be in place. It won't be active, and you have just lost everything. So to receive a payout from your insurance company for the damage, your policy must remain active. So that's what you need to know, number one.

Suze: Also, your mortgage lender is going to require you to maintain your insurance on this property even if it is destroyed, and that's what insures the lender's financial interest in your property. What you should do, however, is you can contact your insurer, make sure you notify them immediately about what happened, and they will guide you through the claims process and everything. So, JJ, you know what costs are covered and what are not. Now what's interesting is that you also need to know they cannot drop you.

KT: So that's my next question.

Suze: You have a question like that?

KT: Yeah, let me, let me read it to you. This is from Rosita. Wait, can my insurance company cancel me during our rebuild? And if our insurance company is giving us trouble, what do I do? So there you go. Rosita has that exact question. Can they cancel her?

Suze: So before I answer her, can we for a second, can we go back to JJ because he wanted to know what should he do. So.

Suze: JJ, you are to contact immediately your electrical company, your gas company, your water company. Call all your utility companies and report the destruction of your home, obviously, and do what's called a service disconnection, and this will stop future billing. For cable and internet, contact your provider to cancel or suspend that service as well so because you're no longer able to use it. Now it is possible that many of these companies have what's called a disaster relief program which they will make it that you don't have to really pay even a back bill or something like that just check with your company and find out also for many of you who may be moving let's say you move somewhere, they also may be able to relocate your service KT to your new address so you don't have to go through all the additional cost and everything of setting it up all over again. All right, who was it who asked her the other question?

KT: Rosita

Suze: And so here's what you need to know is that your insurance company must continue to reinsure you during the rebuilding process for at least 2 years, KT, after the disaster, and they are likely to insure the rebuild home as long as you are meeting their requirements. So if it's taking longer to rebuild, they'll continue to insure you.

Suze: But what's important for you to know is that if insurance problems arise and this happened a lot KT during the Oakland fires, then there is legal recourse. All of you, you don't have to be powerless in these situations, and that's through the Department of Insurance. So if you contact the Department of Insurance, they will help you now if for whatever reason your insurance company decides not to renew you after the two-year period, that's when you go to the California FAIR plan if nobody else will do so.

Suze: All right.

KT: All right, my last question is from Donna.

KT: She said, Suze, how long do I have to rebuild? It's so hard when I haven't been able to even get in touch with my agent. This is a big problem going on right now, Suze, she said. His voice mail is full. I can't even leave a message. Should I even think about rebuilding and just take the money and run and just become a lifelong renter?

Suze: No, no, no, cause if you just take the money and run. And you don't rebuild. Then, Donna, all you're going to get, even if you have been paying for replacement value is the actual cash value. That is it, and you're out of there. You still then do own the property, however, and you could sell that as well, but

Suze: You know how I just said a few seconds ago that they have to insure you for 2 years, KT and things like that. The reason I said that is that most insurance companies do give you anywhere from 12 to 24 months to rebuild or repair your home. In this particular situation, they'll probably give you longer than that, but remember.

Suze: Everything takes time, so you have permits you have environmental so just make sure you stay in touch, Donna, with your insurance company to understand your deadlines and requirements and just, just stay in touch with them and do what they ask you and you could rebuild, sell, and then become a renter if you want.

KT: Suze, what do you think's going to happen to the real estate value like just in Pacific Palisades?

Suze: So listen, we're already way over our 30 minutes. I'll do a thing on real estate on Sunday, everybody, and what I really think's happening in the United States, do you remember a long time ago I said to all of you when I was on CNN and they wanted to do a thing with me. What is your greatest nightmare? And my greatest nightmare was what was happening with insurance and real estate. So for all of you who always have wanted to invest in real estate, you think real estate is the only way to invest, and you're just stuck on that. Just remember what just happened. So KT, everybody is loving that we changed the theme song. You didn't want me to, did you?

KT: I just love um what Sia created, but I think what you're playing right now is more... is more appropriate.

Suze: Yeah, our theme song really for this year, I'm going to keep it as KT Together we will rise because this is going to be a problem that I know just happened in LA, but it's going to come up in other places again whether it's a hurricane or a tornado or anything, right? And even though our overall theme.

Suze: This year is make your money, make more money. And hopefully by listening to this podcast, we are helping you making your money, make more money.

Suze: The truth of the matter is the strongest thing we can do, the best thing we can do is stick together because together what will happen, KT, we will rise. See you Sunday, everybody. Bye bye.