The ripple effects of the record-breaking property losses in California due to wildfires in 2017 and 2018 are still being felt as survivors work to rebuild their homes, local governments scramble to help recover needed housing and property taxes, and insurance companies consider how to best spread the risk in a state where an estimated 4.46 million homes – a third of state inventory - are vulnerable to the threat of wildfire.
The good news is that most homeowners carry insurance, and nearly every homeowner policy across the industry covers damages and losses from fire – including wildfire. Insurance companies play a major role when disasters strike in helping customers in the immediate aftermath with living expenses incurred when their homes are destroyed and in the long term of rebuilding. The bad news is that two-thirds of Americans typically are underinsured, and this gap could seriously hurt their chances of rebuilding their lives after a disaster. Following the disastrous 2017 and 2018 wildfire events in California, insurers helped many people recover. But one unfortunate ripple effect of those wildfire disasters is that insurers are reviewing their portfolios, raising rates in some areas, or choosing not to renew policies for customers who are in high-risk areas.
State regulators via Departments of Insurance are charged with oversight of insurance companies doing business in their states, with the goal of keeping insurance affordable and available to all consumers. After all, property insurance is a requirement of federally-backed mortgages and home loans and is the crucial financial safety net that allows people to rebuild their lives after a major catastrophe.
The fallout from the major recent wildfire losses has included competing legislative bills that seek to protect consumers from the impacts of rising insurance costs and to give relief to Californians who lost everything to wildfire. Insurers want to continue to do business in the state but need to be able to charge rates that reflect the risk. The Stronger California Coalition lays out the facts and myths surrounding some of the competing legislative priorities that are getting a lot of attention currently.
What can Californians do now to keep their homes insured and insurable? NFPA’s recent webinar on financial preparedness for wildfire includes the following tips:
- Recognize that it’s not just wildfire risk that determines your insurability and rates – age of home, quality of construction, and loss history are also taken into account.
- Not all insurers use the same guidelines -- they have competitive differences. This gives you choices – shop around.
- Participate in local wildfire safety activities, whether via Fire Safe Councils, Fire Adapted Community programs, or NFPA’s Firewise USA recognition program. Not every insurer will take these efforts into account in their underwriting decisions, but many do look favorably on community wildfire risk reduction activities.
- Make sure you know what’s covered in your policy, and have your deductible in your savings.
- Talk to your agent to make sure you have enough coverage to replace your home and contents.
- Make and update a home inventory of your belongings.
- Ask your agent for an insurance checkup each year and update your policy if needed.
- If your insurer declines to renew your policy, ask if there is something you can do to reduce your risk and keep your policy; and shop and compare insurance with a local broker.
- If you have loved ones who have paid off their homes, make sure they are carrying property insurance.
- Finally, if you believe you are being treated unfairly, contact the Department of Insurance.