How To Avoid Risking Homeowners Insurance In California

Avoid Having An Uninsurable Home

Are you a California homeowner struggling to find insurance lately? Did your carrier send you a non-renewal notice? 

Or, maybe you’re considering buying or selling and are wondering what’s behind the rising costs and shrinking options. 

You’ve probably heard that some big insurers have left California, and it’s true – 7 of the top 12 insurance companies are gone. And, an increasing number of companies are denying or canceling policies. This isn’t an accident: rising risks, especially wildfires, and limitations on rate hikes pushed them out.

Geico was the first one to throw in the towel, leaving the auto market. Soon, giants like Progressive, Travelers, and State Farm followed. Farmers Insurance has taken drastic measures too, not renewing old policies and reportedly planning a new, high-cost company. Right now they have a limited pool of money for new policies, so timing your purchase could be crucial.

In part one, I walked you through four things that can affect your insurance rates or that may prevent you from getting insurance. Now we’ll explore some ways you can improve your chances of obtaining insurance coverage for your home.

California Fair Plan

The California Fair Plan offers additional insurance when other carriers won’t, but there’s a catch. Their premiums can be double or even triple what you’d pay for standard insurance. 

While it acts as a lifeline, it can also function as an anchor. For instance, my home in Tahoe incurs nearly $20,000 per year in insurance due to the fire risk – and this is involving two companies, one being the California Fair Plan Act. 

In San Francisco, using the Fair Plan for homes with issues like knob and tube wiring adds only a few thousand dollars to the yearly premium, not tens of thousands. It’s crucial to explore this option before making a purchase.

The California Department of Insurance

The California Department of Insurance is aware that consumers are paying more for insurance due to their restrictions on rate hikes. They’re currently in talks with insurance companies to find a solution. 

I do believe that a solution will be found. The goal of the California Department of Insurance is to make sure that insurance is affordable for everyone. 

While they didn’t anticipate the unintended consequences of their decision, it’s likely that they’ll allow rate increases to entice companies back to California. This could create a more competitive market, potentially allowing those who paid higher premiums to shop around and get some money back. That’s the optimistic outlook, at least.

Proactive Measures for Buyers and Sellers

We recommend that buyers consult with insurance companies about specific houses before making an offer, to avoid surprises later. 

And, sellers, be aware of potential red flags that could deter coverage. Have a plan to direct buyers to appropriate providers, especially if the home has outdated features (like knob-and-tube wiring). Remember, if a buyer can’t secure insurance, loan closure becomes impossible, leading to escrow complications. 

To navigate these challenges, we advise that buyers and sellers:

  1. Partner with a knowledgeable agent: They’ll help you navigate the ever-changing insurance landscape and connect you with suitable providers.
  2. Know insurance obstacles: Familiarize yourself with factors that can complicate coverage, such as house features or location.
  3. Be proactive: Verify coverage for specific houses early by contacting insurance companies before making offers. Your agent can provide a list of relevant companies.

By taking these steps, you can navigate the current insurance landscape and ensure a smoother transaction process, whether you’re buying or selling.

What You Can Do

#1: Improve Home Safety and Property Condition

Perform regular maintenance to keep your property in top shape.

  • Keep gutters and drainage systems clear to prevent water backups.
  • Clean dryer vents regularly to reduce fire hazards.
  • Apply a fresh coat of latex paint, which acts as a protective barrier for your home.

Prioritize Upgrades During Construction

  • If you’re undertaking construction projects, use the opportunity to thoroughly update wiring and plumbing while walls are open.
  • Meticulously maintain records from contractors to verify updates for insurance companies when you sell.

Reduce Fire Risk

  • Clear away brush and create defensible spaces around your property to minimize fire threats.
  • Opt for fire-resistant materials whenever possible, including roofing, siding, and windows.

Fortify the Foundation

  • Ensure the structural integrity of your foundation and framing.
  • Consider seismic retrofitting to make your home more resilient against earthquakes.

Install automatic shut-off valves

  • Consider adding automatic gas and water shut-off valves, which can significantly reduce potential damage and may even qualify you for insurance discounts. 
  • Some modern options offer app-based control for added convenience.

#2: Understand Your Coverage Needs

It’s wise to meet with your insurance agent every few years to ensure your coverage aligns with your current needs and property condition. This can help avoid any gaps in protection and can maximize your benefits.

We conducted a webinar on this specific topic with Susan Ott, a local broker, who shared numerous valuable suggestions. 

Insurance needs change over time, making it beneficial for someone to assess your entire situation. I have to say that when Susan reviewed all my insurance, I was surprised by the numerous actionable items she identified. Her insights and tips were truly valuable.

Stay Informed

We all want to ensure we’ve done everything to protect our homes, our most significant investment. Insurance plays a crucial role in providing a sense of safety from potential issues and disasters.

Keep in mind that the insurance industry is ever-changing, and what may be true today will not be true tomorrow. As a homeowner, it’s super smart to stay informed on the latest developments.

For more information about real estate in and around San Francisco, check out our videos. We cover everything from neighborhood reviews to market data. If there’s a real estate topic you’d like to know more about, let us know! And if you’re thinking about buying or selling a home, we’d love to be your go-to real estate resource. Please contact us if you need help.

January 25, 2024
Buying a Home , Selling a Home
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