One of the most important choices you make as a homeowner is how to effectively insure your home and possessions. However, it is becoming increasingly difficult to obtain homeowners insurance in California, especially in locations that carriers consider to be fire prone areas. Recent California wildfires have resulted in higher premiums, cancellations, and non-renewals for current homeowners and challenges for home buyers seeking to insure their purchases.
What are your options when your insurance carrier refuses to insure your new home or renew your policy? How much insurance is enough? How do you prove the value of your property and possessions? I’m here with all of the answers you need to help you make more informed decisions about your homeowners coverage.
Challenges of Maintaining or Obtaining Homeowners Insurance in California
Across the country natural disasters – including mudslides, hurricanes, earthquakes, and wildfires – have cost insurance carriers billions in payouts over the last few years. Many carriers are now refusing to insure high-value properties or properties that are seen as being at-risk. This includes real estate in Napa Valley. Carriers who still write policies are becoming increasingly expensive and are following increasingly stringent guidelines.
In my recent conversation with Bernard Lauper, CEO of MacCorkle Insurance, he said that some of his clients have seen homeowners insurance premiums increase at a rate of 200-400% for coverage that is often less comprehensive than their prior coverage.
Cancellations and Non-Renewals
Some companies are cancelling or refusing to offer homeowners insurance in fire prone areas. This is even true for renewals of policies with current customers. Multiple claims in your area, heavy brush, and fuel load – not just on your property but on neighboring properties, geographic distribution of risk can all be reasons for cancellations and non-renewals.
Obtaining New Homeowners Insurance in California
My buyers are frequently finding that none of the standard admitted insurance carriers will insure their property. Or, they will only do so for exorbitant premiums and and the insurance is contingent on the installation of expensive fire prevention systems.
Many insurance carriers are looking at a risk assessment based on individual addresses. The FireLineⓇ score by Verisk takes into account fuel to feed a fire, the natural features of the area, and ease of access to the property for emergency responders. In some cases, for instance, homeowners with significant nearby brush areas may be cancelled while another home in the same area without that proximity won’t be. In Napa County, many carriers are insisting on firewood being 100 feet from structures. Another anomaly is that carriers are no longer insuring barns with car collections if the property is not the owner’s primary residence.
Options for Homeowners Insurance in Fire Prone Areas
Many frustrated homeowners looking for coverage are turning to alternative carriers like California Fair Plan and surplus lines carriers like Lloyds of London. These types of carriers have seen an increase in new policies of up to 60% over the last two years.
California Fair Plan, funded by a consortium of admitted carriers, has a dwelling coverage limit of $1.5 million. It offers fire and vandalism protection but does not provide the liability, theft, and other protection normally included in a California homeowners insurance policy. In order to make up the difference in coverage, homeowners need to opt for a wrap-around policy in order to ensure the home is fully protected.
For properties valued at more than $1.5 million, surplus lines carriers like Lloyds may be the only option. Lloyds functions as an insurance marketplace, where syndicates of insurers share the risk of loss among themselves. Because Lloyds and other non-admitted carriers are not regulated by the state, policyholders do not have the right to appeal coverage decisions to the California Insurance Commissioner.
Best Ways to Decrease Your Risk
In order to give yourself the best possible options, here are some things to keep in mind, whether you’re shopping for a new policy or considering your policy renewal.
- If you have a pool, make sure that you have a pump installed that will allow the fire crews to access pool water for firefighting.
- Be sure to have a generator installed so that the well’s pump, sprinkler system, and other elements of your fire protection system work in the event of a power outage. I recommend a solar operated gate as a back up in the event the power is out and something has happened to the generator.
- Prevention is essential. Clear brush, do not stack firewood near the home, use treated wood. All of these can help make a difference in how your property survives in the event of a fire and in its insurability.
- One way to improve your odds of remaining with a carrier may be to bundle your other insurance coverage – auto, life, jewelry, wine collections, artwork – along with your homeowners insurance. This can give you a better chance of retaining your coverage if your company is looking to reduce risk in your area.
- The right insurance carrier matters. Ask for recommendations and find out what the claims process is like from current customers. Saving a few dollars on your premium isn’t worthwhile if the carrier makes it difficult or impossible to prove or process your claim.
- Make a video of the contents of your home, especially for antiques, art pieces, couture clothing, wine collections, or other items that are unusually rare or expensive. You may need to prove that they were physically in the home in the event of a total loss.
- Upload policy information, photos, video, receipts, and any other documentation of value to a cloud-based storage system, like Google Cloud or Dropbox. This will allow you to access them in the event of the loss of your property.
- Meet with your insurance agent on a yearly basis or more often if there is a change in the value of your home or personal possessions. This is especially important if your home has undergone renovations or if you have built a large addition.
- Keep copies of all important documents in a safe or an easy to grab-and-go file in the event you need to evacuate in a hurry – birth certificates, driver’s license, passports, and keep an updated document with all your bank accounts, credit cards etc.
Spending some time to get your current coverage in order can help you ensure that you are properly protected, both now and in the future. Sitting down with your insurance agent on a regular basis is the best way to understand and adjust as your life and needs change.
Be sure to check out my podcast with Bernard Lauper to learn more and rest assured that I will be with you every step of the way as we explore your options and find the home and coverage you need.