What coverage do homeowner policies provide for wildfires?

With the recent catastrophe in Maui, I was asked what insurance coverage is provided in the event of a wildfire.

First, understand a wildfire to the insurance industry is simply a fire. The following polices will come into play: home, renters, condominium, rental dwellings, apartment building and personal article policies. Most dwelling and property policies cover fire.

With that, I will keep this explanation restricted to home, renters and condominium unit policies, which tend to be owned by individuals and families. Based on the photos I have seen, very few of the dwellings will be reparable and none of the personal property will be salvageable.

It has been over a month since the Maui wildfire. Insurance companies have been sending teams of adjusters and claim handlers to the island. The logistics of handling the claims are mind boggling. Temporary housing and offices must be found. Staying on another island and traveling back and forth may be a solution.

Because of the loss of life and people who remain missing, the area may have restrictions on who can enter. Modern technology such as drones will surely be used. Cellphones versus destroyed land lines will also be valuable. While insurance companies know who they have insured, finding the survivors may be a problem.

Once the insured parties have been found, the first action by the insurance industry should be to get them money. These people have lost everything, and food and shelter are their No. 1 priorities. I have been to Maui and the town of Lahaina. While they are beautiful to visit, they are isolated. Shelter may be the hardest thing to find and insurance companies contract with companies who specialize in finding temporary housing.

Home, renters and condominium unit policies provide coverage for loss of use. This is usually based on a percentage of the dwelling in a home policy or the contents in a renters or condo policy. Because of delays in construction this coverage has been expanded to allow for up to two years of benefits. Loss of use coverage, also known as additional living expenses (ALE) insurance, or Coverage D, can help pay for the additional costs one might incur for reasonable housing and living expenses if a covered event makes a house temporarily uninhabitable while it's being repaired or built.

While people will have the choice to rebuild or purchase a similar home, because of the limited number of homes on the market, rebuilding may be the only solution on Maui. Depending on the home policy, the insured may receive the actual cash value of the dwelling or the replacement cost, with actual cash value being replacement cost minus depreciation. Contents coverage is provided also as a percentage of the dwelling. While the norm in a home claim is to ask for an inventory of the personal property lost, sometimes when the loss is so great paying the limits of the policy to the insured makes better sense.

Renters have coverage on their contents and loss of use. Unfortunately rebuilding may be at the mercy of a landlord. A renter never knows if their landlord has insurance or intends to rebuild.

A condominium unit owner, on the other hand, has coverage on his contents and provides loss of use. They also are part of condominium owners association that must purchase insurance on their dwelling and will be required to rebuild.

While insurance can replace the lost property, the logistics of rebuilding will be an additional nightmare for the people of Maui.

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Friday in the Observer-Reporter.