Wildfires May Make Insurance Harder to Get in California

August 14, 2018

Wildfires are blazing throughout the state of California, with more than 10,000 people under mandatory evacuation as their homes remain under threat.

Concept of homeowners insurance on blackboard in chalk

© Arijit Mondal - Moment/Getty Images

But as firefighters work on the containment of at least 11 wildfires that continue to burn throughout the state, the California Department of Insurance is already warning homeowners about the insurance headaches they will likely face, even for those whose homes weren’t affected in the latest fires.

The increasing number and severity of wildfires will likely make it more difficult for homeowners in the state to find and hold onto insurance, the California Department of Insurance warns.

California Insurance Commissioner David Jones told the Associated Press that more insurance companies may choose not to renew policies, or may stop writing homeowners policies in areas with the highest fire risk. He also says homeowners in the state should be prepared to face rate increases. Also, some portions of the state may be reclassified from safe to high-risk for wildfires that could jump costs for homeowners.

In 24 California counties with the highest fire risk, the number of non-renewals from homeowners insurance rose 15 percent from 2015 to 2016, according to the Department of Insurance. In 2016, insurers dropped more than 10,000 policies in those high-risk counties.

For homeowners who get dropped, they’ll likely need to pay more and go through nontraditional channels, such as surplus lines or California’s FAIR plan, which often provides only basic coverage.

“More and more homeowners who cannot afford insurance may decide to go uninsured, risking their life savings and ultimately seeking relief from federal and state governments,” warns a Department of Insurance report.

Wildfires were blamed for causing about $12 billion in insurance claims last year, the highest ever on record. This year, that number will likely be higher, state officials caution.

An estimated 3.6 million homes in California are located in a “wildfire urban interface,” 1 million of which are considered “high” or “very high” risk of fire.

California fires may make homeowners insurance harder to get,” Associated Press (Aug. 13, 2018)