California Wildfires Are Making Homeowners Insurance More Difficult to Get

Homeowners insurance usually offers some coverage for any damage done to homes and belongings as a result of wildfires. But as the latest slew of wildfires across the Golden State has shown, homeowners insurance might be increasingly tough to get.

Over 6,000 wildfires have plagued California this year, ravaging more than 580,100 hectares and causing damages worth over $2.6 billion. And according to experts, the situation isn’t expected to get much better over the foreseeable future.

So what does this mean for homeowners? More specifically, how will this impact their ability to secure homeowners insurance?

Homeowners Insurance More Difficult to Get

The California Department of Insurance has stated that the growing number of wildfires across the state will make it more difficult for homeowners to secure insurance. And as the wildfires continue to pose a problem, the issue of insurance will likely become even worse.

It’s expected that an increasing number of insurance providers will choose not to renew policies, even for those who are already clients. They may also decide not to undertake any new policies for properties that are located in higher-risk areas.

At the very least, homeowners who are still able to retain policies will likely experience a rate hike.

There aren’t exactly any precise numbers of homeowners who are unable to get insurance, but the Department of Insurance estimates that insurance policy non-renewals increased about 15% between 2015 and 2016, and over 10,000 policies in high-risk counties were dropped by insurance providers over the same time period.

If homeowners want to secure a policy, they’ll have to do plenty of searching for companies who would be willing to cover them. They’ll also have to dig a lot deeper into their pockets to get one.

However, all losses that insurance providers have paid out thus far cannot be thrown at policyholders all at once. According to state law, rate hikes can only increase over time rather than all in one shot.

But at the same time, the state is not permitted to force insurance companies to cover homes from the risk of fire, either.

What Can California Homeowners Do?

Homeowners who have been denied policies from their insurance providers or are finding it difficult to find a company who’s willing to offer coverage may still have options.

Rather than going the traditional route and obtaining a policy from conventional insurance providers, there are policies available through “surplus lines.” These policies can be obtained from surplus line insurers that may be licensed in the state that they are based in, but don’t have to be licensed in California.

For instance, a surplus insurer based out of Oregon must be licensed in that state. But they don’t have to be licensed in California, even though the policy they are offering is specifically to cover a property in California. 

Homeowners may also want to consider going with the California FAIR plan, which offers insurance for homes located in high-risk areas. However, these policies only provide minimal coverage. That said, more and more homeowners are choosing to go with the FAIR plan, which is reflective of how difficult the insurance market currently is in the most vulnerable counties in California.

Some homeowners are even choosing to forego insurance altogether simply because they can’t afford the rates or are just out of luck when it comes to obtaining a policy. Instead, they are turning to the government for some help in this area.

California has always been vulnerable to wildfires given the dry, warm climate. And some areas are certainly at higher risk than others. With wildfires continuing to ravage the state and expected to continue into the future, the trend of insurance companies making it more difficult to obtain a policy will likely continue as well.

Regardless, there are other avenues that homeowners may want to consider in order to ensure they are covered in the event that their homes are damaged by wildfires.