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Wildfire Risk Has Insurers Bailing on California Homeowners – Here’s What to Do
State Farm and Allstate have stopped accepting new applications for property and casualty insurance in California. Allstate quit months ago. State Farm recently announced its decision, which doesn’t affect auto insurance.
State Farm said the decision is “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.”
Wildfires have burned millions of acres in California and destroyed about 1,800 structures in recent years, according to Cal Fire.
Outside of California, homeowners in Kentucky and Louisiana are seeing a sharp increase in the cost of flood insurance — partially because floods aren’t covered under regular homeowners insurance. Instead flood insurance is mainly sold and backed by the federal government through FEMA. Homeowners in Florida have seen similar premium spikes, too, following devastating storms in the last several years.
Some states and local governments are even suing FEMA to block higher premiums. Homeowners in parts of southeast Louisiana are seeing an average increase of around 500% on their flood insurance premiums.
If you’re a homeowner in one of these states, what can you do?
First off, it’s important to know that homeowners insurance doesn’t always cover natural disasters and what risk looks like in your area — whether that’s earthquakes, wildfires, floods, hurricanes, hail damage and so on. Even if you have regular insurance, you may need an additional policy.
If you’re struggling to find residential insurance in your area, you still have options. The California Department of Insurance and other experts offer this advice.
Bottom line: If you’re finding it more difficult to insure your home because of where you live, explore all your options, including the FAIR plan. Do everything you can to protect what’s likely to be your greatest asset.
Robert Bruce is a senior staff writer at The Penny Hoarder covering earning, saving and managing money. He has written about personal finance for more than a decade.
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