Buying a home for the first time? Congratulations! Now what? Well you’re definitely going to need a homeowners policy before you can close escrow. Many people find insurance very complex because it can be. Most insurance contracts are written by attorneys and use big words that most people never heard of like “dwelling protection” or “loss of use”. What does that mean? Keep reading and I’ll explain.

Before you purchase a policy ask questions.! Get referrals from friends and other homeowners. Make sure the companies are strong financially and have a good reputations. Ask yourself, have you ever heard of them before? Also, understand that not all carriers follow the same rules if they’re an out of state company.

Lastly, you can talk to a licensed insurance agent and make sure you get a variety of options. Each carrier may have more than 1 product and some will offer bundling discounts if you have your auto insurance with them too!

Homeowners Insurance Basics

The first thing to look for when you are reviewing your homeowners insurance quotes is your Dwelling Coverage which simply means the structure of the house. However, the coverage is not based on property value but rather the reconstruction cost. In other words, how much would it cost to rebuild your house from scratch? Whatever that dollar amount is – that is how much coverage you need. Just remember any separate structures like a garage or your fence around the property is a separate coverage altogether.

Next we have Loss of Use. If your home is damaged and you need to live elsewhere while your home is being repaired or rebuilt, that’s additional living expenses or Loss of Use. What about your stuff? Your clothes, furniture, jewelry, electronics all falls under Personal Property.

The recommended verbiage you want to see in your policy is Replacement Cost coverage. This will insure you have the full amount available to you in the event of a loss. The alternative option and only recommended as a last resort is Actual Cash Value. In this instance you would be paid up to the limits of the policy minus depreciation and of course your deductible.

Lastly, you will need to consider a lot of the optional coverage options such as Earthquake, Flood or Hurricanes insurance which is always a different policy. Yes, it’s more money but the lack of coverage could prove to be more costly should you have a loss due to one of these disasters. All carriers offer different deductibles and prices depending on your needs.

Talk to a professional and make sure you understand your limits and coverage options. The last thing you want to encounter is your kitchen plumbing burst only to find out that may not be covered!

CA Wildfire

California has experienced its share of wildfires in recent history. The CA Department of Insurance has reported losses of over $12.4 Billion from the 2018 fires, including the Camp, Woolsey and Hill fire and over $18 Billion total. These fires devastated communities, burned over 1.8 million acres and sadly claimed 80 lives. Unfortunately, this will clearly result in CA home insurance rates to increase.

So just how much are rates increasing? We’re seeing rate hikes from 20% to as high as 400%! Yes! You read that correctly, 4-0-0 percent! Obviously that is NOT good news for consumers. Prices doubling and tripling might become the norm in certain rural areas of the state.

Unfortunately, there are even more areas where consumers are receiving letters in the mail from their current insurance carriers informing them that their policy is being Non-Renewed. In short, find a new insurance policy with another company. So now what do you do?

Limited Insurance Markets

Now we have limited insurance carriers accepting these “High Fire Risk” areas with sticker shock prices. You have other companies that have decided to not loose any more money in claims and completely stop offering insurance in certain areas or in some cases the entire state. We’ve even had some companies completely go out of business due to the wildfire claims they could not afford to pay.

Even well known high-risk companies like Lloyd’s of London have seen losses and are taking the same measure with tightening up their underwriting guidelines. So what do you do when nobody will insure your high risk home? Last stop, California FAIR Plan. Per their website, ” The FAIR Plan provides insurance as a last resort, and should be used only after a diligent effort to obtain coverage in the voluntary market has been made.” It’s important to note “There is no public funding, or taxpayers’ monies involved. The FAIR Plan is not a state agency.”

Review before you renew

Whether you live in the city, the valley, desert or mountain areas, we’re all being affected by the wildfires in CA. The subsequent changes in underwriting guidelines and steady increase in premiums don’t seem to have an end in sight. Next time that dreaded renewal paperwork comes in the mail make sure you review it before you renew it. The total may not be the same as last year; consider yourself lucky if you’re being renewed with less than a 20% increase! If you don’t like it make sure you shop for homeowners quotes from different carriers. It’s still a competitive market out there and some insurance company will accept your money!