If you own a home in California, there’s a good chance you’re going to need homeowners’ insurance. Recent disasters have proven that the out-of-pocket expenses of rebuilding or repairing a home can be devastating. Homeowners’ insurance is your guarantee that you won’t be left out in the cold if a disaster comes to your doorstep.
Whether you’re a first-time buyer looking for coverage for a new home or you’re simply renewing the existing protection on a home you’ve owned and loved for years, there’s a few things you need to know about this essential coverage.
1. 1 in 3 California Homes are at Risk for Wildfire
If you live in California, there’s a good chance you know someone who’s been affected by wildfires.
In August of 2018, over 600,000 acres burned, destroying more than 1,000 homes forcing tens of thousands from their homes. Each wildfire season, the blazes get bigger and the damage continues to grow. Between October and December 2017, wildfires in Northern and Southern California destroyed hundreds of acres of land along with thousands of homes and businesses. The devastation was teh largest in recorded State history - but the record only remained for 8 months until the 2018 blazes started and the Mendocino Complex fires became the largest in State history.
There are an estimated 3.6 million Californian homes in areas classified as “high or very high risk-of-fire”. That’s 32.6% of all homes statewide.
Fire damage is covered in a standard homeowners insurance policy. Whether your house burns completely to the ground or is just damaged by smoke, this coverage can save you from paying out of pocket to rebuild, repair, or replace after a fire.
2. CA Homeowners are Struggling with Rising Premiums and Finding Coverage
Homeowners who live in areas at high risk for wildfire have been struggling with insurance issues over the past six years.
The California Department of Insurance has received a staggering increase in homeowners' insurance complaints, including:
- 249% increase in renewal complaints from high-risk zip codes
- 217% increase in premium increase complaints from high-risk zip codes
In some cases, homeowners who were paying an annual premium of $800 - $1,000 for insurance saw a renewal increase to as high as $2,500 - $5,000 for the same coverage.
And many insurers are deciding not to issue renewals for homeowners’ insurance in these high risk areas.
3. Landslides and Mudslides Typically Aren’t Covered
After wildfires destroyed huge portions of Southern California, the damage was quickly followed by a monumental mudslide in Santa Barbara County in January, 2018.
The Montecito Mudslide came in an instant and swept away everything in its path. Thousands of people were evacuated, entire neighborhoods were buried in mud and water, over a hundred homes were destroyed and 20 lives were lost.
Those who survived are now facing uphill insurance battles to rebuild after the disaster.
Typically, mudslides and landslides are excluded from standard homeowners' insurance policies.
These types of disasters are considered “earth movement” just like earthquakes or sinkholes. Flood policies generally don’t cover landslide/ mudslide coverage and earthquake policies usually only reimburse if an event is caused by an earthquake.
There is one type of coverage that could potentially protect homeowners from the damage of a mudslide or landslide: a DIC policy. Difference in Conditions (DIC) insurance can offer coverage for some perils typically excluded by a standard homeowners’ policy, like mudslides. It’s typically offered as a stand-alone policy, but you may be able to add it as an endorsement to your homeowners’ coverage.
Residents of Montecito are hoping that insurers will cover their losses. They’re arguing that the mudslide never would have occurred if it weren’t for the catastrophic Thomas Fire that had destroyed 300,000 nearby acres the previous month.
Dave Jones, California’s Insurance Commissioner, said the state law is clear when one disaster leads to another.
"The indications are that the fires did cause the mudslides and that they should pay claims," Jones said. "It is frustrating for homeowners. I feel that frustration."
4. Homeowners' Insurance Is Required to Finance a Home
Unlike auto insurance, your home isn’t required by law to carry insurance coverage. However, mortgage lenders do require homeowners carry insurance coverage if you want to finance your home.
Insurance protects your lender’s interest in your home.
Lenders collateralize your mortgage against the home. If a home is lost to a catastrophe or disaster, the mortgage has little value. Homeowners' insurance protects the homeowner and lender from financial loss in the case of damage to the home.
5. Your Lender May Limit Your Deductible Amount
A deductible is the amount of money a homeowner is responsible for before the insurer will pay on a claim. Many insurance policies offer a lower premium cost with a higher deductible amount; this cost-saving method is often used by people who want to lower their monthly payments.
But your lender may put a limit on your deductible amount to ensure you can pay your share in the event of an unforeseen disaster.
Some lenders require a deductible not to exceed a certain amount, such as 2% of the total value of the house.
Your lender may have other requirements for your homeowners' coverage, as well. That includes the total coverage of the homeowners' policy being enough to replace the home and total mortgage amount, and they may require additional hazard coverage, such as earthquake or flood coverage in areas prone to those disasters.
6. Living Close to a Fire Station Could Lower Your Rate
Looking to buy a new home? Ask your real estate agent to show you properties in close proximity to fire stations and fire hydrants.
Generally, a home located within 5-miles of a permanently-staffed fire department and 1000 feet of a fire hydrant earn better fire protection ratings. And not all fire stations rate equally: the amount of fire trucks, how much water they can carry, and the number of firefighters at that station can influence their fire protection rating… and your insurance rates.
Having a nearby fire station will help to keep your home safe in case of fire. And it could also help to lower your insurance costs, which is a win-win for homeowners.
7. Your Policy Could Get Terminated.
The good news? Insurers can’t cancel your policy in California without good reason. The bad news? They don’t have to renew you.
There are three ways your homeowners' insurance can be terminated by your insurer.
Rescission: the insurance company voids your policy before it starts.
Policies aren’t often rescinded, and when they are it’s typically due to a material misrepresentation, concealment of information, or a mistake on the application. Be sure your application is true and accurate to avoid a rescission.
Cancellation: the insurance company terminates the policy before it expires.
After a residential policy has been in effect for 60 days, the insurance company can only cancel a policy for reasons specified by law, which include; nonpayment of premium, fraud, material misrepresentation, or physical changes in the insured property that increase any hazard insured against.
Non-renewal: the insurance company terminates the policy at the expiration date.
There are currently no laws in California that prohibit an insurer from non-renewing a homeowners' insurance policy. However, you must receive a 45-day notice in writing containing the reason(s) for the non-renewal.
California Homeowners Struggle to Find Insurance In Aftermath of Fires
1 in 3 Californians is at risk for wildfire. These homeowners are struggling to find affordable insurance coverage in the wake of devastating wildfires.
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8. Your Dog May Limit Your Coverage and Rates
Your dog may be just another member of your family to you, but to an insurer Fido could be seen as a risk. In fact, many insurers have a “bad dog” list of uninsurable breeds.
Dog bite-related claims accounted for more than ⅓ of all homeowners’ insurance liability claims in 2013, costing insurance companies $490 million.
To protect themselves from risks, insurers may raise your rates or even deny you coverage if you have a breed that’s commonly involved in attacks. For example, the CDC reports that Rottweilers and pit bull-type dogs are involved in approximately 60% of fatal attacks on humans, so these breeds often top insurers' lists.
The 14 most often blacklisted dog breeds most insurers don’t like to cover include:
- Pit Bull Terriers
- Staffordshire Terriers
- German Shepherds
- Presa Canarios
- Chow Chows
- Doberman Pinschers
- Cane Corsos
- Great Danes
- Alaskan Malamutes
- Siberian Huskies
Be honest with your insurance agent about what type of dog you have. Lying could result in your policy being rescinded or cancelled, or you could find yourself not covered in the event of a dog bite.
There are specialty insurers who are willing to take a risk on your dog - even if it’s been blacklisted by others. Your agent can help you find an insurer who will work with you and provide a policy that’s the right fit for you and your furry friend.
9. Homeowners’ Insurance Doesn’t Cover Everything
As we’ve already pointed out, not all perils are covered in a standard policy. But homeowners’ coverage is designed to protect you against many of the most common perils to a home.
Generally, homeowners’ insurance covers damage resulting from:
- Fire or lightning
- Windstorm or hail
- Vandalism and mischief
- Falling objects
- Weight of ice, sleet, and snow
- Riot or civil commotion
But the following are examples of perils typically not covered by a standard policy:
- Earth movement (mudslides and landslides)
- Insects, rats, and mice
- Water damage from leaks or seepage
- Wear and tear
- Tidal wave
- Nuclear hazards
Policies will typically exclude coverage if the home has been vacant for 60 days or longer, as well.
If a covered peril happens to your home, your homeowners’ insurance policy will pay to repair, replace, or rebuild - after you’ve paid your deductible and up to the limits of your policy.
Talk to your insurance agent about the risks you’re most likely to face as a homeowner in California to determine what additional policies you’ll need to fully protect your home.
10. You CAN Get Covered, Even if You’re High-Risk
If you live in a home that’s considered high-risk, plan on moving to a high-risk location, or have had a policy non-renewed, finding homeowners’ insurance can feel difficult.
While it may feel impossible, you CAN get coverage.
There are many insurance providers who specialize in high risk homeowners’ insurance. The problem is, not every insurance broker or agent knows where to find these high-risk providers.
When you’re looking for insurance coverage for a high-risk home, find an insurance broker who has high-risk experience. Some brokers, like Aegis Insurance Markets, specialize in high-risk homeowners’ insurance.
Aegis is located in Northern California, in the high-risk, fire-prone Truckee area. Not only are we high-risk experts with a long list of insurers willing to cover high-risk homes, we’re also able to get the most competitive rates on high-risk homeowners’ insurance.
If you’re worried about getting coverage for your home, don’t be. Call Aegis and let the high-risk professionals get your home the insurance protection it needs.
There’s a lot of benefit to being a homeowner in California. The Golden State has scenic beauty that ranges from mountain ranges to redwood forests to sandy beaches. Insuring the homes in this beautiful landscape can be tricky, but with the right amount of knowledge and the right insurance broker on your side, you can find affordable coverage for your home.