CNN
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Tens of thousands of California residents will decide whether to relocate permanently or rebuild their homes after the most devastating 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 the cost of additional living expenses while you’re away from your home to maintain what is your usual standard of living,” said Karen Collins, vice president of Property and Environmental Division of the Property Casualty Insurance Association of America.
For example, if someone’s insurance covers $100,000 for a property, the insurance company can cover another $20,000 — or 20% — in additional living expenses, Collins said.
Peter Vanek, president of PVRK, a real estate consulting company based in Southern California, said his home was destroyed by a battery fire in 2023. His insurance originally valued the home at $350,000. After Vanek provided proof of what he lost, his insurance paid twice as much, including living expenses during the move, and the house was rebuilt.
Insurance coverage plays a large role in the decision to move or invest resources in rebuilding. For some with insurance, it can result in taking pictures of the property before damage and updating insurers with home appraisals.
“(Homeowners) may not have the disposable income to cover the difference between whatever their insurance will cover and what it costs them to rebuild their home, to replace all their items,” said Vanek.
The current fires in Los Angeles County are the costliest and 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 homeowner 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 the insurers.
California Department of Insurance Commissioner Ricardo Lara said Thursday that insurance companies should stop any non-renewals or pending cancellations for properties near the fires.
“I’m working on all fronts to make sure the victims of the fires get the benefits they’re entitled to and get them as quickly as possible,” Lara said Friday in a statement.
Moving is not necessarily easier than rebuilding. Moving in typically costs between $884 and $2,569, according to digital marketplace HomeAdvisor.
Mike Madowitz, chief economist at the Roosevelt Institute, said many of those affected by Hurricane Katrina chose to stay put after moving because of the cost and hassle of moving again.
Most residents affected by natural disasters don’t move, said Aaron Terrazas, a former chief economist for Glassdoor and senior economist at Zillow. He added that local economies get a boost after natural disasters because residents buy cars, washing machines and other goods as they rebuild.
“But we should have no illusions that this is some kind of meaningful growth for the economy,” Terrazas said.
According to the Bureau of Labor Statistics, about 18% of the US workforce in 2023 was foreign-born. And about a quarter of the construction industry is immigrant workers, especially in regions like Los Angeles, Terrazas estimated.
Migrant workers have flocked to places hit by natural disasters, such as New Orleans after Hurricane Katrina and parts of Florida recently, Terrazas noted. During the recovery period, these workers may work in construction or start small businesses.
President-elect Donald Trump has proposed mass deportations, which could cause construction to stall. Terrazas said.
“Some of these types of policies are a one-two punch for a sector like the construction industry,” he explained. And “it’s not just work. They are material.”
Imported materials, such as appliances, would cost more if Trump imposes more tariffs. Timber, which were priced high because of the Trump administration’s previous tariffs, could become even more expensive, and businesses could increase their costs as a result, said the Roosevelt Institute’s Madowitz.
PVRK’s Vanek said independent contractors and homebuilders, not large companies, will largely lead the construction effort in California.
“There is no efficiency in rebuilding a community destroyed by fire,” he said.