Do you know what a "total loss" is?

The insurance companies do. You should.

Especially now that brush fires have devastated California.

Every homeowners and commercial fire policy in California says more or less the same thing: if your property burns down, initially we owe you Actual Cash Value or ACV. In the case of what are called replacement cost policies, if you rebuild, the insurer owes replacement costs, which is exactly what it sounds like: enough money to replace your property.

But the meaning of ACV has fluctuated over time and now, by law, it depends on how badly the fire impacted your property. If there is a "total loss", the insurer initially only has to pay fair market value, which in some cases may be very low. If there is a "partial loss", the insurer has to pay the repair costs, less physical depreciation.

But what is a total loss? Excellent question. The best answer (although not the one insurers prefer) is a complete destruction of the property, with no usable remnants. That means if your foundation is intact, it's not a total loss.

Be careful not to confuse car insurance and property insurance here. We often say a car is "totaled" if the cost to repair it is more than the car is worth. But that's not the rule for property insurance. Even if the cost to repair is twice or three times the fair market value of the property, if the property is not completely destroyed, the insurer has to immediately pay to fix it.

So, if you've recently been impacted by the horribly destructive brush fires sweeping across California, make sure you know that there is a difference between a total loss and a partial loss, and figure out which one yours is.

Here's another thing, in the case of a total loss, there are rules regarding what insurers can do. You don't have to rebuild for at least 12 months. You can rebuild at another location. Other rules may apply because in some areas a state of emergency has been declared.

If you have a fire loss, get your policy from your insurer. Read it. Figure out your rights under the policy and the law.

If you have any questions, please call.