Big Changes for California Homeowners Insurance
Here’s what you need to know:
The recent announcement by the largest residential insurance provider in California, State Farm, that they would no longer sell new home insurance policies anywhere in the state caught many off guard and left some wondering if they would be able to insure their homes at all, particularly in fire-prone areas. The action by State Farm is the latest development in a wildfire-fueled crisis that started in the aftermath of fires in 2017 and 2018. Increased fire risk and rapidly increasing construction costs have erased insurance providers’ profitability. At the same time, price caps and other mandates set by the state have kept premiums artificially low compared to other states. While the insurance companies are saying that they will honor existing policies, we are seeing some homeowners dropped from their providers and/or buyers having difficulty obtaining new policies. As the state and insurance industry work to find a solution, here are things homeowners and prospective home buyers can do.
Learn about fire-smart landscaping and home hardening techniques and implement changes as soon as possible. Some insurers offer discounts for fire hardened homes or homes in Firewise communities.
Consider replacing an older roof or electrical panel. Some underwriters will not insure a property unless these items are in excellent condition and up to current building codes. The federal Inflation Reduction Act makes you eligible for up to 30% of the total cost of electrical updates, up to $3,200 per year, as a federal tax rebate. Click the button below to find out more.
Insurers are required to give 75 days written notice before canceling a policy. Start shopping for a new policy immediately if you get a cancellation notice, but make sure all fire mitigation measures are completed first. Insurance brokers who work with multiple carriers can be helpful in this process. Consider paying your policy in full each year to avoid any missed payments and possible cancellations.
Carry the highest deductible you feel comfortable with and plan to use your insurance only for catastrophic events. While your insurance may cover you for the theft of a bike or a small roof leak, we have seen these things be the cause of future non-renewals, sometimes even if the claim is denied by the insurance company. This is also true for those who carry renters’ insurance, as the individual can be seen as a risk rather than the property.
The California FAIR plan is the insurer of last resort, but the coverage is limited and can be expensive. If you are covered by a FAIR policy it is recommended that you supplement with a Difference in Conditions policy. An insurance broker can help you find one that fits your needs.
