Presented by C.A.R (California Association of Realtors)
Home insurance companies have responded by forgoing the issuance of new policies, imposing huge premium increases on existing customers, and leaving many property owners worried about losing their coverage. Here are some tips to help those impacted maintain their current insurance plan or, if necessary, find a new one.
Q: State Farm and Allstate have announced they will no longer sell new home insurance policies in California because of wildfire risks and an increase in construction costs. What does this mean for prospective homebuyers?
A: In certain high-risk areas of the state, there are very few insurance companies willing to write new policies. In some, State Farm was the last private insurance company writing policies. In those areas, the generally more-costly California FAIR plan may end up being the only property insurance available.
Q: How does this decision impact existing State Farm and Allstate policyholders?
A: State Farm and Allstate will continue to service and renew policies of existing clients in the state and offer new auto insurance policies. However, they will not be issuing any new property insurance policies for the time being in California.
Q: What will happen if more companies follow State Farm’s and Allstate’s moves?
A: There are still a wide range of companies writing policies in California. However, those willing to write new policies in higher risk areas are declining, and as stated above, with the departure of State Farm and Allstate, those in more high-risk areas may have no other option than the FAIR plan.
Q: What actions are being taken to improve the situation in the future? Any news regarding the Department of Insurance plans to encourage more carriers to write policies in California?
A. Many entities such as the nonprofit United Policyholders are maintaining regular dialogue with insurers to encourage them to recognize the value of wildfire risk reduction and resume insuring condos and homes located in the wildland-urban interface and suburban regions. The Department of Insurance also maintains dialogue with insurers on a regular basis and is consistently working to improve California FAIR Plan options.
Q: What is the California FAIR Plan and what options does it offer?
A: The California Fair Access to Insurance Requirements (FAIR) Plan provides basic fire insurance coverage for properties in high-risk areas as a “last resort” option when traditional insurance coverage is not available. A FAIR Plan policy offers protection from risk of fire and will satisfy a mortgage company’s requirement that your home be insured, but it doesn’t cover theft, flood, earthquake, hail, vandalism, or personal liability.
Q: Should homeowners expect to pay higher premiums if fewer insurance companies are willing to write new policies?
A. Several factors have led to today’s challenging insurance market, which has, particularly in some areas of the state, contributed to higher premiums. The best way to avoid paying higher rates is to seek out a proactive, consumer-oriented agent or broker to help educate you on your options.
Q: What is the mandatory one-year moratorium on non-renewals?
A. The one-year moratorium refers to Senate Bill 824 (2018), an important consumer protection law that requires a mandatory one-year moratorium on insurance companies cancelling or non-renewing residential insurance policies in certain areas within or adjacent to a fire perimeter after a declared state of emergency is issued by the Governor. The protection from cancellation or non-renewal lasts for one year from the date of the Governor’s emergency declaration. The law has been implemented following wildfires in 2019, 2020, 2021, and 2022. For more information or to find out if your ZIP code is included in the latest moratorium, visit the Department of Insurance or see the C.A.R. fire insurance resource.
Q: What are the restrictions on an insurance company’s right to terminate coverage or “non-renew” an existing policy following a wildfire?
A. If you live in a ZIP code protected under the one-year moratorium, your insurance company is prohibited from cancelling or non-renewing your residential insurance policy for one year from the date of the Governor’s emergency declaration following the fire. If your home was destroyed by a wildfire, your insurer must renew you for two years. An extension of up to 12 additional months, for a total of 36 months, should be granted if you encounter delays beyond your reasonable control. For more guidance on protections following a wildfire, visit the Department of Insurance’s Top Ten Tips for Wildfire Claimants.
Q: What resources are available for homeowners in the event their insurance provider non-renews them?
A: If you are one of the many Californians whose insurance company has notified them they will not be renewing a policy on their home, don’t panic. First, your insurer must give you at least 75 days notice before your policy expires to issue a nonrenewal. You can also contact your provider to see if there are any actions you can take to qualify for a renewal. The California Department of Insurance provides useful guidance for responding to non-renewal notifications and also provides several information guides, tips, and tools for understanding home/residential insurance. Plus, you can contact their Insurance Customer Hotline (800-927-HELP) for assistance. In the event the decision is not reversable, finding a good “independent” agent using the resources mentioned above can help you find and maintain adequate coverage you can afford.
Q: What questions should I ask when shopping for home insurance?
A: Asking good questions, trusting your instincts, and checking license statuses will help you avoid being scammed or overpaying for insurance. Some suggestions to ask when working with a broker or agent:
How long have you been in business?
Are you a “captive” agent, meaning that you exclusively represent one company? If not, how many companies do you represent?
If I cancel the policy mid-term, will there be an “earned minimum” premium?
If I have a loss and need to file a claim, how will you assist me?
Is there a broker fee plus a commission, and if so, how much will the commission and fee be?