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. Banks can foreclose on homes is the borrower fails to meet insurance requirements.
But options are drying up.
California State FAIR Plans 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 cost thousands for home in areas with any significant 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 trying to get insurance companies to come back and expand areas of coverage, offering more policy options for California homeowners.
To that end, the state has offered regulatory changes that are attractive to insurance companies. Still, it’s not clear if that will translate into more policy underwriting — at least, not in the way the public officials hoped 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.
It does, however, show the length that people may have to go to in order to decrease the risk of wildfire damage to their properties and maintain fire insurance coverage in a state that has been battered by wildfires for nearly a decade.
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