Getting Home Insurance is Not a Slam Dunk.

March 11, 2020

Blame the Fires.

It wasn't too long ago that one of the last things that you did when you were in contract to buy a home (after surviving the standard torture from the bank) was to line up a home insurance policy. It was simply a matter of calling up 2-3 insurance agents, get their best rate, and then sign up.  It was pretty easy, and took less than a day or two.

But thanks to the recent wildfires across California, that's definitely no longer the case. After suffering repeated catastrophic financial losses, insurance companies are being much more selective about what areas they will write home insurance policies — if they even write them at all.

High Fire Hazard Designation.

When you purchase a home, the seller is required by law to provide you with a Natural Hazards Disclosure Statement (NHDS) with the sale. In that disclosure, you get an declaration of the property's proximity to earthquake faults, gas pipelines, and areas designated to be a high fire hazard.  The latter has become a lightning rod of sorts lately for insurance companies, as they desperately try to mitigate their risk and exposure in a state that has become more prone to devastating wildfires.

If the home resides in a high fire danger zone, rest assured that it's going to more difficult and a lot more expensive to procure a fire insurance policy.  Even if a home is not designated as residing within an area of high fire danger, some insurance companies will not issue a policy if it's even in close proximity to such an area — sometimes as far away as 15 miles!

High Policy Saturation Areas.

Fire zones aren't the only reason that insurance companies may deny you a policy.  Some of the very large insurance companies have written so many policies in a given neighborhood, that they've imposed a moratorium on new policies because the risk becomes too high if there's some sort of disaster in that neighborhood — regardless of its fire zone designation.

For example, there are parts of Los Altos and Los Altos Hills where State Farm will not write policies, just for this very reason.  So it's important that you don't just assume that your family insurance agent of 25 years who represents a large insurance company is going to be able to write a policy on your new home.

Plan Ahead.

The good news is that there are still enough insurance companies out there that will write policies on California homes, especially here in the Bay Area where it's a bit more suburban than where some of the recent wildfires have been.  But it's critical that you start the process as soon as you are in contract to purchase a home, and not wait until the very end of your escrow period.

Some insurance brokers will even provide you with a budgetary quote on a home before you write you write your offer.  That way you'll know in advance is the home is insurable, and what the policy will cost.  With premiums varying wildly in price, insurance is now becoming a significant cost in home ownership.

If you're looking for a good knowledgeable insurance agent, contact me.  I have several that I can refer to you!

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