The cost of fire insurance is increasing in the state of California. But that’s not the only problem that homeowners are running into.
With wildfire risk high this year, many of the bigger insurance companies are getting more cautious about offering policies at all.
Recent reports show homeowners are struggling to find a carrier who will issue them a home and fire insurance policy at all. Even those with existing policies are being sent non-renewals.
Over 1.2 million homes in the state are at moderate- or high- wildfire damage risk. With banks and lenders requiring insurance on home with mortgages, they need some form of fire insurance — but may not be able to find it on the open market. If borrowers fail to meet these insurance requirements, banks can foreclose on their homes.
But options are drying up.
California State FAIR Plan for Fire Coverage
In order to help owners of higher risk properties, California set up the FAIR plan. FAIR offers homeowners state-backed policies for residents who have no free market fire insurance options.
Per the FAIR plan’s website:
“If you and your broker are unable to secure a policy from another company, your broker can help you find a Difference in Conditions policy which offers additional coverages to provide the equivalent of comprehensive homeowners insurance.”
FAIR Plan premiums often run into the thousands of dollars for homes in areas with any significant wildfire risk. However, private insurance policies — if they are available — tend to be expensive too.
That leaves homeowners with few options that are affordable and available.
State Insurance Reform Efforts
California is working to encourage insurance companies to return and expand coverage options.
To that end, the state has offered regulatory changes that are attractive to insurance companies. However, it’s uncertain if these reforms will lead to the widespread policy underwriting that public officials hope for.
California politicians are also considering other changes that will make insurance coverage more practical. For instance, homeowners can get new modern windows and doors, build with fire rated materials, and remove any flammable items to a certain setback distance from the home to make them more fire-proof.
However, for many homeowners, meeting the requirements is financially impractical, which might prove a sticking point in insurance company negotiations.
These efforts highlight the lengths to which both residents and the state may need to go after nearly a decade of devastating wildfires.
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