Due to damage caused by wildfires, mudslides and other natural disasters, propertyinsurance rates are likely to go up this year.

Tim Gosselin, vice president at Lee & Associates,and Daniel Olson, a broker with Wateridge Insurance Services,recently filmeda video explaining how property insurance rates will beaffected by recent natural disasters and what owners should knowabout this issue.

GlobeSt.com, a sister publication ofPropertyCasualty360.com, spoke with Gosselin and Olson about howCalifornia property owners should approach their property insurancepolicy and what to avoid.

GlobeSt.com: How should SouthernCalifornia property owners approach property insurance since therates are likely going up?

Olson: First off, you want tomake sure that your application is accurate and that whoever youhave shopping the insurance for you — a broker ormultiple competing brokers — has the same up-to-date information.Often, an application isn’t accurate (people don’t want to askquestions or be a bother, and they don’t want to deal withinsurance, so applications end up being incomplete).

Next, make sure all preventative measures are in place: firesprinklers, burglar alarm, fire alarm — all the various degrees ofprotective measures categorized by insurance companies. And makesure your rent roll is up to date with current tenants so there areno surprises after the policy is bound.

The insurance company will send out somebody to inspect theplace, and if they find out that what they were told wasinaccurate, they can cancel your policy. Make sure that you haveall the updates and that all fire-suppression and theft-preventionmeasures are mentioned, and make sure you do this well before yourrenewal date. Give yourself three months, and remember that youneed to show a potential new insurer what claims or lack of claimsyou have had.

You can get a few quotes and play them off each other — thatmakes them start sharpening their pencil a little more. You get thebest possible rates and returns when you have multiple firmscompeting for your business. Also, terms can change when the markethardens, so you may want to issue a renewal with different terms.If you go to them late, they won’t have time to react. Start earlyand complete the application.

Related: California proposes stronger laws to help wildfiresurvivors with insurance claims

Speaking of terms, there are different ways of being paid by aninsurance company on a building claim. There are agreed-amountterms, replacement cost and new value. Agreed-amountterms are where you agree that if the property burns to the ground,it will cost a certain amount to build, so you want the agreedamount on the policy. There are also replacement-cost terms — youdon’t want materials for a 25-year-old building; you want theamount that will allow you to replace it to current standards.

And there’s actual cash value, which is pretty common on olderstructures with a lack of renovations. If you don’t have proof ofwhen you had the electrical updated, and it’s a building from the’60s, you might get actual cash value if it’s destroyed. Look outfor actual cash value as well as basic form and broad form. Specialform is also known as an all-risk policy form; it flips the tableson insurance companies so that they cover everything except what’sexcluded. They have to prove the loss was excluded rather thanproving that the loss was included.

GlobeSt.com: How can owners get thebest ratio of coverage to rates that they need for theirproperties?

Olson: You want to have somecompetition. It also depends a lot on where the building is locatedand how desirable it is to underwriters. It’s important to have atleast two brokers looking at a property so you can confirm you’regetting the best price. Insurance brokers are like doctors: youalways want a second opinion, so why not get one if you anticipatehaving a problem with renewal?

Related: Expenses incurred to minimize loss should becovered

If your building is older, you have had claims, you’re locatedclose to brush — for example, all the places in Santa Rosa andVentura that burned were near open land — those are the peoplelooking to make sure they shop their insurance properly at thistime. 2018 might be a little sticky as far as rates and terms.

GlobeSt.com: What should they avoiddoing when acquiring property insurance?

Olson: Underinsuring is thenumber-one thing to avoid doing — operating under the assumptionthat the place is never going to burn down. Everyone thinks itmight be a partial loss, but look at Santa Rosa: 90% of the homesthat were burned were underinsured. Some commercial properties werealso lost up there, and they were probably underinsured.

Gosselin: A building owner alsoought to get a broker opinion of value — a sheet of some sort thatincludes a summary of the building’s attributes. A lot of questionsan insurance company would ask on an application would be providedon that opinion sheet. But again, those don’t get done overnight,so start early — at least a week in advance of applying. Thatopinion sheet can also include pictures of the building.

GlobeSt.com: What else should ourreaders know about property owners and insurance?

Gosselin: Make sure you’reinsured for all the additional things above and beyond the actualproperty, like building to Title24 and ADA requirements.

Olson: Ask questions withproperty insurance, and always get a second opinion.

Related: Dissecting the insurance definition of propertydamage

Carrie Rossenfeld ([email protected]) is a reporterfor the San Diego and Orange County markets on GlobeSt.com, a sister publication ofPropertyCasualty360.com.