Tens of thousands of California residents will decide whether to permanently relocate or rebuild their homes following the most devastating fires in Los Angeles history.

Insurance companies can cover thousands of dollars in temporary housing and living expenses – unless homeowners are underinsured or uninsured.

“The policy generally covers the cost of additional living expenses while you are away from home to maintain your usual standard of living,” said Karen Collins, vice president of The Claims and Environmental Division of the American Property Casualty Insurance Association.

For example, if someone’s insurance covers $100,000 on a property, The insurance company could cover another $20,000 – or 20% – in additional living expenses, Collins said.

Peter Vanek, president of PVRK, a Southern California-based real estate consulting firm, said his home was destroyed by a battery fire in 2023. His insurance company initially estimated the house at $350,000. After Vanek provided evidence of the loss, his insurance company paid double, including living expenses during his move, and the house was rebuilt.

Leave or build new? Insurance coverage plays a major role in the decision to move or invest resources in reconstruction. For some insureds, it might come down to taking pictures of the property before the loss and keeping insurers updated with estimates for the home.

“(Homeowners) may not have the disposable income to cover the difference between what their insurance covers and the costs they incur to rebuild their home and replace all of their items,” Vanek said.

The current wildfires in Los Angeles County are the costliest and most destructive in its history. According to a report from JPMorgan Chase, insured losses could exceed $20 billion.

Read more about the difficult decisions facing California homeowners here.