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Securing Homeowners Insurance in a Changing Landscape

May 09, 2024

Due to the increase in wildfires and other natural disasters combined with inflationary rebuilding costs, many California homeowners are being denied insurance coverage or paying much higher premiums. In fact, some top insurers such as Allstate, The Hartford and State Farm have stopped issuing policies to California residents.

If you’re a homeowner, here are some practical steps you can take to secure essential coverage and safeguard your largest investment.

Check Your Policy Renewal Dates

Insurance providers must notify you one to three months before your insurance policy’s renewal date if they intend to raise premiums or decide not to renew the policy. This notice gives you time to explore alternative insurance options and secure coverage for the home. Start shopping for coverage immediately.

Submit a Non-Renewal Appeal 

If an insurance company refuses to renew your policy, coverage will cease at the end of the existing term. Contact the insurer and confirm the reason for the policy non-renewal. Ask them to reconsider their decision, especially if you can provide documentation showing you’ve lessened any perceived risks. Be ready to discuss any recent measures you’ve taken to protect your home, your claims history and the overall condition of your property.

For example, if the non-renewal was due to concerns about wildfire risk, provide photos and receipts related to fire-resistant materials or structures recently installed around the home. This might lead the insurer to reconsider their decision. Obtain a list of relevant home improvements from your insurance agent and complete some of them before submitting your appeal.

Shop Different Insurance Carriers

If your appeal is denied, you can secure a new state approved insurance policy that meets your lender’s requirements. Review mortgage documents and consult with your insurance agent to ensure the prospective policy is the right one for you. For example, if your lender requires flood coverage due to your home's location, make sure to include that coverage when shopping for a new policy.

If you secure coverage on your own, provide the policy declaration to your mortgage servicer so they can remove force-placed coverage.

Understanding Force-Placed Insurance

If you’re unable to successfully appeal the policy non-renewal and have an existing mortgage, the lender can buy a policy to protect their interest in the property. Lender-imposed coverage, called forced-place insurance, may partially safeguard the lender but won’t protect your belongings. Premiums are often double that of typical home insurance. Federal regulations require mortgage servicers to provide a minimum 45-day notice prior to imposing force-placed insurance.

Explore FAIR Plan Options

Most states provide Fair Access to Insurance Requirements (FAIR) plans, which offer basic catastrophe coverage when standard insurers won't. These state-run programs temporarily insure homes with a minimum level of protection, even in areas considered too hazardous by private companies.

For California homeowners facing policy non-renewals, FAIR plans provide a way to maintain essential fire coverage. Difference in Conditions (DIC), Flood, and Earthquake policies are also available to supplement perils not covered under the basic FAIR plan. FAIR plans and supplemental policies can fill the gap while you continue searching for a standard homeowners insurance policy.

File a Complaint

If you believe your insurance was cancelled without cause and you’re unable to get satisfactory answers from your agent, file a complaint with the California Department of Insurance. And if you experience problems related to forced-place insurance, you can file a complaint with the Consumer Financial Protection Bureau. These agencies can help you get answers and alert you to other options based on your unique circumstances.

New Bill in the Works

California has spent billions of dollars on wildfire mitigation and homeowners have learned to create defensible spaces around their properties to reduce risk. Because of this, new legislation has been introduced that would require insurers to consider these efforts when calculating insurance coverage and costs.