Navigating the Challenges of Losing Home Insurance Due to Fire Risk

In recent years, wildfires have become an increasingly significant concern for not only homeowners but insurance companies alike. As a result, for those lucky enough to have been renewed by their insurance company, we have seen a rise in home insurance premiums, and for those not so lucky, we are being dropped entirely.

In the last 12 months we have even seen a mass exodus of insurance companies from the State of California and homeowners (new and existing) are now needing to find alternative forms of coverage, relying heavily on the California Fair Plan for the fire portion of their home insurance.

Losing home insurance is a daunting experience but there are steps we as homeowners can take to navigate this challenging situation. Here's what you need to know and how you can protect your property.

Understanding the Risk

Wildfires are not just a seasonal threat; they are a reality that can affect property values, safety, and the availability of home insurance. Insurance companies assess the risk of insuring homes based on several factors, including location, proximity to fire-prone areas, historical fire data, and even the materials used in construction. If your home is deemed to be in a high-risk area, insurers may either increase premiums substantially or refuse coverage altogether.

The Impact on Homeowners

Losing home insurance can feel like a double blow.  If you have a loan on your home, lenders and banks typically require home insurance as a condition for financing, so losing insurance means not only being faced with the anxiety of living in a high-risk fire area, but also having to deal with the financial uncertainty of high costs from the California Fair Plan.

What is the California Fair Plan?

The California Fair Plan was established so that all California property owners have access to basic fire insurance when access to coverage in the traditional market is not available through no fault of the property owner.

Steps to Take If You Lose Your Insurance

Unfortunately, at the time this post is being written (May 2024) if your insurance provider is contacting you to let you know that your policy is no longer being renewed in the State of California, we haven’t found much reprieve. If you are in a high fire risk area, chances are your only option is to have the fire insurance portion of your home insurance be covered by the California Fair Plan. High fire risk areas and costs for each home are different. Insurance companies now look at each individual home rather than zip codes.

Additionally, from what we have gathered, the cost of the FAIR plan is largely based on the home's construction and its proximity to a water source. For example, two homes in the same neighborhood could have entirely different costs if one home has a fire hydrant in front of it and the other does not.

If you received the news that you are no longer being renewed, here are somethings that may help:

1. Contact Your Insurance Provider:

• The first step is to understand why your policy was canceled. Sometimes, specific mitigations can be implemented to reduce risk and reinstate coverage.

2. Implement Fire Mitigation Measures:

• Create Defensible Space: Clear vegetation and combustible materials from around your home, when you can.
• Fire-Resistant Landscaping: Use fire-resistant plants and materials in your landscaping, again, when you can. Though living in the mountains, this may be harder.

3. Stay Informed About Local Fire Risks:

• Local fire departments and agencies often provide resources and information about reducing fire risk. Engage with community programs aimed at fire prevention and preparedness.

4. Advocate for Community Measures:

• Sometimes, collective community action can make a significant difference. Working with neighbors to create a Firewise Community can help reduce overall risk and might improve insurance prospects, sometimes even reducing the costs of our premiums.

Our goal at GRO Real Estate is to help homeowners navigate the complexities of property ownership, including the challenges posed by natural disasters. Losing home insurance due to fire risk is a significant hurdle, but with proactive measures and informed decisions, homeowners can manage this risk.

To learn more about how losing fire and homeowner insurance is affecting people here in the Santa Cruz Mountains, you can read the article from the SF Chronicle that our very own Sarah Wagner was interviewed for, you can check out this article written by the Santa Cruz Local and if you need to find alternative coverage, please reach out to us. We would be happy to put you in touch with our insurance contact to help you get the best possible coverage you can.