Insurance cancellations prove difficult for homeowners

By Julie Giyer
Kern Valley Sun

All over California wildfires have been breaking out, destroying hundreds of homes and businesses. A fire can break out anytime, anywhere. Getting your home insured could be a real game-changer in saving your belongings and peace of mind. You’d think that would be the least of your worries, but, it is not. Many victims of home loss with home insurance are at risk of being non-renewed by their insurers. In January, the moratorium law SB 824 took effect leaving tens of thousands of rural homeowners struggling with insurance cancellations following the wildfires. Homeowners who have had their insurance canceled say that their insurance premiums have doubled or tripled; costing them thousands of dollars a year. Homeowners have shied away from buying homes, which in turn has lowered housing markets. Ricardo Lara, California Department of Insurance (CDI) Commissioner, ordered a one-year memorandum in hopes of giving the department and legislature more leverage to bring insurers to the bargaining table which forced them into conversations. The memorandum states that “An insurer cannot cancel or refuse to renew a policy of a residential property insurance for a property located in any zip code, within or adjacent to, the fire perimeter for one year after the declaration of a state of emergency as defined in section 8558 of the government code, based solely on the fact that the insured structure is located in an area in which a wildfire has occurred. This prohibition applies to all policies of residential property insurance in effect at the time of the declared emergency.”

The California FAIR Plan reached out to Lara, explaining that the industry had no choice in the cancellation after paying out more than $24 billion in damage claims following the fires in 2017 and 2018. Several insurances were forced out of business because the potential losses were tremendous. The California FAIR Plan Association supports Lara’s memorandum, yet if they offer HO-3 coverage (policy covering fire only) it would lead to significant adverse and unintended consequences to FAIR plan policyholders. The HO-3 policy offered by the FAIR plan would be more expensive for homeowners making it an inconvenience for CDI’s opinion. They would not be able to comply with the order until June of 2020 because they do not have what they need to develop such a product. Their plan only covers fire, vandalism, and malicious mischief.

There is still yet another hiccup for homeowners of mobile homes. The California FAIR plan states openly that homeowners can receive a DIC policy, this information is untrue. Stick built homes have adequate coverage, but the DIC policy is not offered at this time. Homes in high-risk fire zones are only offered hazard insurance. So, when purchasing a home, this is something important to look in to. It is highly recommended that you reach out to insurance agents or carriers for your specific insurance needs.

David - December 22, 2019

This is a good article on insurance cancellations. Has there been any info on how the insurance companies are applying this new thing? Is it just all properties in an area, or are they surveying individual homes to evaluate defensible space and other fire-safe issues, how close to adjoining properties the structures are, etc etc?

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