Hot Top: Homeowners Insurance in the Sierras

If your insurance carrier refused to renew your policy, don’t stress. It’s happening to more and more homeowners, particularly throughout California where wildfire losses are causing huge upheavals in the insurance industry. Knowing you’re not alone may make you feel a little better - but it doesn’t help cover your house.

Here’s what you need to know about high-risk homes and non-renewals.

If you live near a high-risk fire area and received a non-renewal notice of your homeowner's insurance, it is important to know your rights and options. While there are currently no laws in California that prohibits an insurer from non-renewing a homeowner's insurance policy, California law does provide consumers with specific rights in the event of a non-renewal:

  • The notice of non-renewal must be sent at least 45 days prior to policy expiration.
  • That notice of non-renewal must contain: (1) the reason or reasons for the nonrenewal; (2) the telephone number of the insurer's representatives who handle consumer inquiries or complaints; and (3) a statement indicating that if the consumer has contacted the insurer to discuss the non-renewal and remains unsatisfied, the policyholder may have the matter reviewed by the California Department of Insurance.
  • The insurance company must determine whether to renew or non-renew based upon its underwriting guidelines, which must be objective, have a substantial relationship to the risk of loss, and be applied consistently among insureds in the particular group being non-renewed.

Just because you receive a non-renewal notice does not mean that you will be unable to get coverage from another insurance company. The California Department of Insurance recommends consumers who receive non-renewal notices do the following:

  • Ask for help from your current insurance agent or insurance company to see if there are any improvements you can make to your home to mitigate your fire risk and maintain your current policy.
  • Shop the market. Not all insurance companies have the same eligibility guidelines. You may want to consult with a local agent familiar with your neighborhood. Residential insurance protects your largest financial investment. Plan on taking enough time to conduct a comprehensive search when purchasing insurance. The greater the extent of your search, the greater the opportunity to find residential insurance that meets your specific needs.
  • Contact the California FAIR Plan at (800) 339-4099. The FAIR Plan was created by the Legislature to make property insurance more readily available to people who have difficulty obtaining it from private insurers because their property is considered "high risk." Please note that the FAIR Plan provides only basic fire protection. If you purchase a FAIR Plan policy, you may also want to consider purchasing supplemental insurance known as "Difference in Conditions" (DIC) coverage. DIC policies are designed to provide coverages such as liability, theft and Additional Living Expenses, which are not covered by the FAIR Plan policy.
  • Visit the California Department of Insurance web site for additional resources on homeowners insurance and for a list of insurance companies that are licensed to sell residential insurance coverage in California.

We encourage residents who receive non-renewal notices to contact the California Department of Insurance if you have an insurance question or need assistance resolving an issue with your insurance company. You can call them at 1-800-927-4357, or visit their website at insurance.ca.gov to send them an email.

Back-to-back severe wildfire seasons in California are changing the insurance landscape and have cost billions in insurance losses. This makes insurers more cautious about writing policies in California, particularly in “high-risk” areas. Both 2017 and 2018 had a greater number of fires than the running 5-year average. To put it in perspective, compare the direct losses for homeowners and farm-owners in 2018 vs 2016:

  • 2016 direct losses: $4.2 billion
  • 2018 direct losses: $16 billion

More than 25% of California homes are at moderate to extremely high risk of being ravaged in an annual wildfire. That means 1 in 4 Californian’s home is at risk for wildfire.

The number of California homes and properties at risk of wildfire threat have reached nearly 7 million, according to a Villanova University study published in August 2018. That’s because more and more homes are built each year in the Wildland Urban Interface (WUI): areas where homes are built near or among wildland vegetation. The WUI is the fastest growing land-use type in the United States. And the riskiest. Wildfires burn more frequently in the WUI and are most difficult to fight there.

More and more insurers are issuing nonrenewals to homes at high risk for wildfire. Here’s what you need to know to keep your home covered. CALFIRE uses a Fire Hazard Severity Zone model developed by scientists at the U.C. Berkeley Center for Research and Outreach as the basis for evaluating fire hazard in local areas.

CALFIRE has created a list of cities deemed high or very high risk; see if your city made the list.

The Fire Hazard Severity Zone (FHSZ) maps are used by:

  • Developers to determine where ignition resistant building materials will be required for new construction.
  • Homeowners to identify properties that will require defensible space maintenance.
  • Real estate agents and sellers who will be required to disclose natural hazards at the time of a property sale.

FHSZ maps can influence land use decisions, property values, and, yes, insurance rates.

If your home is one of the millions of properties in California deemed “high-risk”, you have options for insurance. Or if you’ve been dropped by your insurance company or find yourself facing larger and larger premium payments to keep your existing coverage, you’re not powerless.

The secret to finding affordable homeowners insurance for your high-risk home is finding the right insurer. Because not all insurance companies are created equal. Some insurers specialize in high-risk homes. These insurers are prepared to cover your home, no matter where in California you live.