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Obtaining affordable homeowner insurance has become a time consuming, frustrating and often expensive adventure for many new home buyers. Climate change caused disasters around the nation have resulted in significant insurance company losses in recent years. Citing wildfire as the culprit in California, insurance companies have sought significant rate increases while refusing or seriously limiting any new homeowner insurance coverage. Decisions by a few large companies to cease all coverage in California have resulted in current homeowners also being affected via receiving non-renewal or cancellation notices.

It is not our intent to herein duplicate the plethora of information available regarding this issue.

Instead, we will highlight several aspects of this insurance challenge and focus on basic information that is most critical to current and would-be homeowners.

How Did We Get Here:    This insurance issue is not confined to California but impacts many states across the nation.  Although climate change is the over-all most often named culprit for the increasing catastrophic events affecting housing, the reasons for our current predicament both State and Nationwide are numerous and varied. Mismanaged forests, allowing home construction in disaster prone areas, failure to foresee and construct community-wide flood or mud slide protection and lack of mitigation education for home buyers has all contributed to our present dilemma. And while we can now enumerate the many causes, finding solutions has proven more difficult.

Insurance Company’s Reaction:      Of the twelve (12) major companies that account for 85% of homeowner insurance coverage in California, 7 have paused, limited or discontinued service. Blaming the increase of catastrophic events, inflation and the cost of rebuilding, the pandemic and California’s insurance pricing restrictions, the companies indicate that their actions are merely seeking to protect their solvency.

California Specific:               Wildfires specifically are said to be the major insurance related problem in California. Statistically, over the past 10 years, one in eight acres has burned in California resulting in over 43,000 destroyed structures and causing 173 deaths. Consumer confusion is increased by what seems to be a lack of defined requirements for obtaining home insurance. This seemingly allows each insurance provider to determine their own guidelines, including what is deemed sufficient individual home fireproofing to merit any price reductions.

Fire Hardening Practices:    Recent information programs have mostly emphasized the importance of wildfire mitigation efforts in individual homes as well as whole community participation. In other words, individually “fire hardening” one’s home is good, but such protection is proportionally increased if the neighborhood undertakes fire mitigation efforts. The Cal Fire home hardening web address presents ideas and guidelines for fire protection for individual homes and the surrounding community plus what is meant by the term “defensible space”. Price discounts are promised for such protection methods but without overall guidelines, seem currently to be determined by individual insurance providers. Shopping for discounts is probably a good idea. It occurs to one that an unintended consequence of this practice might be that all future home insurance policies may require said fire hardening prior to the acquisition of insurance?

California Fair Plan:            Anticipated as a temporary and last resort option for those unable to find any other coverage, the Fair Plan has too often become the first-choice option. The Plan is expensive and provides, at best, minimum coverage. Moving forward, the Department of Insurance hopes to reduce the numbers relying upon the Fair Plan while also helping those currently covered to find a better insurance option. Consumers required to use the Plan should thoroughly educate themselves. An explanation of the Plan can be found at www.united policyholders.org.. (this is a non-profit organization designed to assist consumers)

New Fire hazard Maps:        Cal Fire has prepared new fire hazard maps designating zones by degree of wildfire danger. It is so far undetermined if the insurance providers are or intend to use the maps in their pricing or service decisions.

What To Do If Dropped:      As indicated above, current homeowners are receiving non-renewal and/or cancellation notices. Here are some recommended actions by the Insurance commissioner:

  • Wildfire Risk Score: Ask for your wildfire risk score and see if it can be challenged.
  • Contact local providers: Companies vary regarding requirements. Avoid having your lender provide coverage. This can be extraordinarily expensive and offer only minimal protection.
  • Check your credit score: Some policies are cancelled due to a credit score decline.
  • If Refused Call the Insurance commissioner office for help. 800-927-4357
  • Fair Plan Researched: Hopefully, used only as a last resort.
  • Although you can go uninsured if you own Free & Clear of debt, think twice!

Ideas for Reducing Premium Cost:    Here are a few ideas:

  • Bundle: Include auto coverage with home insurance if not already doing so.
  • Reduce “Bucket” Coverage: Eliminate coverage of barns, sheds, our-buildings and other contributors to the cost to focus on home coverage only.
  • Increase the Deductible: This means that the homeowner will pay more per claim. Be careful if you are home purchasing as the lender may have a deductible limit.
  • Fire Mitigation Efforts: Create a risk reduction plan in consultation with the insurance provider that might lower the premium cost.

Resources:       the following may be helpful.