Home Insurance For Fire-prone Areas – A firefighter hoses down a burning home to help spread the fire to nearby homes in the Skyhawk community as the Shady Fire burns in Santa Rosa, Sept. 28, 2020. Photo by Dai Sugano, Bay Area News Group.
The state is extending temporary protection from insurance cancellations to 2.1 million Californians who live in wildfire-prone regions, but long-term solutions to stabilize the market remain elusive.
Home Insurance For Fire-prone Areas
With this year’s historic wildfire season over, Californians living in fire-prone areas are temporarily relieved of another threat: They may not be able to lose their homeowner’s insurance policies for another year.
Defensible Space For Protection Against Wildfires
Since 2015, premiums and renewal rates have increased in California’s fire regions as companies are unwilling to pay for damage caused by the state’s increasingly devastating wildfires. More than four million acres have burned this year, more than double the state’s previous record. The moratorium, enacted by Insurance Commissioner Ricardo Lara, will give the 2.1 million homeowners near those fires — 18 percent of all insureds in the state — another year to find a new insurance company or take steps to reduce their property’s fire risk and convince their insurer to extend coverage. .
Insurers in California dropped 235,274 policies in 2019, a 61% increase from 2018, according to data released in December by Lara’s office. Of those, 65 percent came in moderate to high fire risk areas, and the state’s 10 most fire-prone counties saw a 203% increase in non-renewals.
Many consumers have turned to the state’s last resort: the California FAIR Plan, a state pool that provides bare-fire coverage to consumers who can’t find another insurer. Enrollments in the FAIR plan increased by 225% last year.
In 2018, Lara, then a state senator, introduced legislation that would require insurers to wait one year before putting an insured in a fire area and two years if the insured’s home is destroyed.
What Is The Difference Between Ho2 And Ho3 Homeowners Policies?
Last December, he used that law to impose a one-year moratorium on non-renewals in 180 ZIP codes identified by state firefighters as directly affected by wildfires in 2019. The new moratorium covers 477 zip codes, more than double the previous one.
“Even though Oakland Hills hasn’t had a wildfire since 1991, I think it remains on the list of areas that some insurers are unwilling to cover.” Amy Bach, United Policyholder.
The 2019 moratorium, which covered more than one million Californians, expires Dec. 5, though 364,000 of those residents live in areas that fall under the new moratorium announced Thursday.
There won’t be a sudden, massive number of people leaving their policies on Dec. 6, said Michael Soler, a spokesman for Lara’s office. Insurers that covered previous moratorium-protected homeowners, but not new ones, can cancel those policies as of their inception date. So, if you got the policy in March 2018, the insurer will not be able to refuse on December 6, they have to wait, for example, until March 2021.
Home Coverages Explained
The new moratorium coincides with Gov. Gavin Newsom’s emergency proclamations on Aug. 18, Sept. 6, Sept. 10 and Sept. 28 that protect homeowners within zip codes affected by these fires for one year.
Amy Bach, who founded the national consumer advocacy group United Policyholders in 1991, said in an interview last month that the current conditions for buying homeowners insurance in California may be the worst she’s ever seen.
Some Californians in fire districts that haven’t been dropped are paying three to four times more in premiums than they were before 2015, he said. Bach said the one-year moratoriums are helpful, but said long-term solutions are needed to protect homeowners in areas that haven’t burned in the previous year or two.
No matter what work they do to reduce fire risk on their properties, many residents in these areas are now seeing cancellations because they are deemed too high-risk given how far California’s wildfires have spread. One example is Santa Barbara, the site of the 2017 Thomas Fire, Bach said.
Over 348,000 California Home Insurance Policies Were Not Renewed Citing Wildfire Risk
“That’s where I expect the insurers have really pulled back because even though there hasn’t been a fire there in a couple of years, I think they have concerns that there could be another one,” he said. “Even though Oakland Hills hasn’t had a wildfire since 1991, I think it remains on the list of areas that some insurers don’t serve.”
Insurers say the market in some fire regions is simply not sustainable, and they face their own challenges for reinsurers, the companies that insure insurance companies.
In 2017, state data shows homeowner insurers paid $2.01 in premiums for every $1 in premiums they collected. In 2018, they paid $1.70 for every $1 in premiums. It added up: Claims for those two seasons alone totaled $24 billion, though Pacific Gas and Electric took responsibility for about $11 billion of those losses.
The 2017 wildfires “almost completely wiped out” the industry’s profits in California from 2001 to 2016, according to a RAND Corporation report last year.
Why Home Insurance Rates Are Going Up In California
The Insurance Department and consumer advocates like Bach both say the ultimate solution is for insurance companies to encourage homeowners to “harden” their homes by making improvements against wildfires, such as installing metal roofing or cutting back brush to clear space around the house.
Bach and Lara co-sponsored a bill this year, AB 2367, that would have required insurers to renew policies for homeowners who met the state’s home-hardening standards, but it died in committee after strong opposition from insurers.
Insurance industry officials said they agree that fire mitigation measures are key to solving the issue in the long term, but argue they need more science to better assess how much specific mitigation measures reduce risk, as well as more flexibility in setting the rates partners can partner with home hardening measures. .
According to the RAND Corporation, the 2017 wildfires “almost completely wiped out” the industry’s gains in California from 2001 to 2016.
Wildfire & Fire Insurance 101: Home Insurance In High Fire Risk Areas
“We’re certainly as interested in the mitigation as anyone because we’re seeing homes saved by the mitigation,” said Janet Ruiz, director of communications for the Insurance Information Institute, a trade group. “Science is only going so far as they determine what makes the real difference.”
Meanwhile, customers like Jamie Jansen, who lives in Bonny Doon, will likely continue to face rising premiums and the risk of not renewing.
When Jansen moved to the area north of Santa Cruz two years ago, his previous home insurer refused to extend coverage, and the company he went to later dropped him in March.
He now pays 70 percent more than last year at his third insurance company. Bonny Doon is covered by a 2020 moratorium, but the cost has Jansen wondering if it’s worth staying in California at all.
Millions In Fire Ravaged California At Risk Of Losing Home Insurance
“It’s going to cause people like me to leave the state,” he said. “If we can’t afford to live here because if our house burns down, we can’t rebuild, then what do we do?”
At the virtual event, the people of Paradise and wildfire experts recalled the terror that engulfed the city and discussed recovery and resilience in California.
Of California’s 150 public colleges and universities, 18 are in areas Cal Fire considers at high risk for wildfires. In addition to evacuation plans, colleges have a variety of fire mitigation tactics they can use to reduce risk.
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State Farm Will No Longer Accept Applications For Homeowners Insurance In California, Citing Wildfire Risk
James is a healthcare intern. He is a junior at Harvard University studying Government and East Asian Studies. Prior to joining, James was an intern with The Hill’s healthcare team…. More James Bicalcirod When you buy a home, you’ll need home insurance to cover a variety of unexpected events that could damage your home. Typically, your homeowner’s insurance policy includes coverage for repairs if your home is damaged by fire. But if your home is located in a high-risk area for fire damage, such as Colorado Springs, CO, or Oklahoma City, OK, you may need to purchase a separate wildfire insurance policy.
To help you prepare for unexpected wildfire damage and determine whether you need to purchase a separate wildfire insurance policy, here’s what your homeowner’s insurance covers in fire-prone areas.
Generally, your homeowner’s insurance policy covers fire damage, including wildfires. For example, if a forest fire damages your home, the policy usually includes coverage to repair or rebuild your home and other structures. Some insurance policies may also cover temporary accommodation, replacement of your belongings and restoration of landscaping. However, the cost and extent of coverage may vary depending on the policy and wildfire risk in your geographic area.
Check your policy to find out your deductible and specific coverage details for your home, personal property, other structures and landscaping such as trees or shrubs.
Insuring Your Property
Homeowner’s insurance generally provides three types of coverage: coverage for the dwelling, coverage for other structures.