State Farm, the largest home insurer in the nation, announced in May that it would no longer offer new home insurance policies in California, citing the increased risk of wildfires in the state. The company said it would continue to renew existing policies, but would not accept new customers. State Farm has about 1.2 million home insurance policies in California, covering about 10% of the market.
The decision by State Farm follows a similar move by Allstate, which stopped writing new home insurance policies in California last year. Both companies have faced mounting losses from wildfires in recent years, as climate change and drought have made the fire season longer and more intense. According to the California Department of Insurance, insurers paid out more than $26 billion in claims for wildfires in 2017 and 2018, the most destructive and deadly years on record.
Other insurers raise rates or limit coverage for Californians
State Farm and Allstate are not the only insurers that are adjusting their business strategies in California due to the wildfire threat. Many other companies have raised their rates, reduced their coverage, or declined to renew policies for customers in high-risk areas. Some insurers have also started using more sophisticated models to assess the fire risk of individual properties, rather than relying on broad geographic zones.
According to a report by the California Department of Insurance, the number of homeowners who received non-renewal notices from their insurers increased by 31% from 2018 to 2019, affecting more than 235,000 policyholders. The report also found that the number of homeowners who purchased policies from the California FAIR Plan, a state-run insurer of last resort, increased by 225% from 2015 to 2019.
How homeowners can find affordable and adequate insurance
For homeowners who are looking for new or better home insurance options in California, experts recommend shopping around and comparing quotes from different insurers. Some websites, such as The Zebra or Policy Genius, allow users to compare rates and coverage from multiple companies online. Homeowners can also contact an independent agent or broker who can help them find the best deal for their needs.
Another option for homeowners who are having trouble finding insurance is to apply for the California FAIR Plan, which provides basic fire insurance for properties that are considered high-risk or uninsurable by private insurers. The FAIR Plan is not a full-service home insurance policy, but rather a temporary safety net that covers up to $3 million in damages from fire, smoke, explosion, lightning, or vandalism. Homeowners who choose this option may also need to purchase a supplemental policy from another insurer to cover other perils, such as theft, water damage, or liability.
How homeowners can reduce their fire risk and lower their premiums
Homeowners who want to lower their insurance costs and protect their homes from wildfires can also take some steps to reduce their fire risk and make their properties more attractive to insurers. Some of these steps include:
- Creating a defensible space around the home by clearing away flammable vegetation and debris within 100 feet of the structure
- Installing fire-resistant roofing materials, such as metal, tile, or asphalt shingles
- Using fire-resistant siding materials, such as stucco, brick, or fiber cement
- Installing dual-pane windows with tempered glass that can withstand heat and flames
- Installing fire sprinklers inside the home and on the roof
- Installing smoke alarms and fire extinguishers in every room
- Creating an emergency plan and an evacuation kit for the family
- Joining a local Firewise USA community or a Fire Safe Council that promotes fire prevention and education
By following these tips, homeowners can not only improve their chances of finding affordable and adequate home insurance in California, but also increase their safety and peace of mind in case of a wildfire.