Don’t Take Home Insurance for Granted.
June 7, 2023
A Rapidly Changing Field.
It wasn't all that long ago that securing fire insurance for your home was one of the last steps that you completed when you were buying a home. After all, there were literally dozens of insurance companies that were tripping over their feet to get your home insurance policy — and, of course, bundling your auto and life policies (this already sounds like a commercial). You simply picked the best deal and you were done.
Boy, it's amazing how a few dozen wildfires and record winter flooding has changed the insurance landscape in California. Even if you are already a homeowner with an insurance policy, this is really important stuff.
Last week, both State Farm and Allstate announced that they will no longer be writing fire insurance policies in the entire state of California. This is a big deal.
What Does This Mean?
If you're already a homeowner who is insured by one of these companies, it doesn't necessarily mean that you are going to be dropped, but it's entirely possible — especially if you in an area that is zoned as extremely high fire danger. But if you decide to move anywhere else in California, they will NOT transfer your policy to the new home, regardless of where in the state you are relocating to.
If you are currently in the market to purchase a home, securing insurance should be one or the FIRST things you should do before your write an offer, not the last thing. This is especially true if you are going to write a non-contingent offer. If you have no contingencies in your offer and you find out late in the escrow period that you either can't get insurance or can't afford the insurance you're offered, you can't use that as a reason to get out of the contract. That's a very expensive mistake.
Of course, a home buyer can always make their offer subject to finding suitable fire insurance, but you know how contingencies fly in our local market. But that may be the only recourse you have to protect your deposit.
What to Do?
Whether you own a home or you're a new buyer in the market, you should definitely have a conversation with your insurance agent. For current homeowners, especially those currently insured by State Farm or Allstate, you should definitely get the straight scoop from your agent about what the future holds. Don't think for a second that these will be the only two insurance companies retreating from the California market.
It's critical for existing homeowners to verify that their coverage has kept pace with the rising building costs in California so that the rebuilding costs will be fully covered in the event of a catastrophic loss. Some owners of more expensive properties are finding they are woefully under-insured.
If you are a buyer who's in the market for a home, you absolutely need to have a discussion with your insurance agent about each house you are considering buying before you write the offer. It's critical that you have a green light from a reputable insurer before you remove that contingency. More and more insurance companies are backing away from homes with wood shake roofs, or those that have antiquated electrical systems. In San Carlos, there are still a lot of older homes that have both of these “insurance defects,” and they will be very difficult to insure.
Let me know if you have questions or concerns about the ever-changing insurance situation in California. I'm happy to connect you with trusted insurance experts who can answer your questions.