Climate change among other factors is making insurance more essential -- and harder to get
Homeowners insurance has become increasingly difficult to afford and harder to get in California and some other states across the country.
The massive wildfire devastation in Southern California and the hurricane damage in Florida and elsewhere speakto the strong need for solutions to a growing problem. Verisk, a company that performs data analytics, estimates that industry-insured losses from the Palisades and Eaton fires together will land between $28 and $35 billion.
Numerous insurance companies, including State Farm and Allstate, have either stopped offering new homeowners insurance policies in the California or stopped renewing some existing policies. Others have left the state altogether.
The percent of buyers who had trouble getting insurance downtown in a California city rose to 16% in 2024, up from to 6% in 2023, according to a report from the California Association of Realtors. For those purchasing a vacation or second home, that percentage rose to 51% up from 23%.
Climate change a factor
Among other factors, climate change is having a big impact, experts say.
Were getting more extreme weather conditions, more natural disasters, more unusual weather, explained Michael DeLong, a research and advocacy associate at Consumer Federation of America. Its probably going to affect maybe eventually tens of millions, unfortunately.
An investigationby The New York Times found that homeowners insurance was not profitable in 18 states in 2023 up from eight in 2013. Most of those states were in the middle of the country, hit by severe storms and hail in the Midwest and Southeast, and wildfires in much of the West, the investigation found. In response to those losses, insurers have raised premiums, narrowed coverage and dropped customers, and even entirely withdrawn from some states, according to the New York Times article.
Weve seen that prices of insurance premiums have really gone up a lot since 2021. They've much exceeded inflation nationwide, said Sharon Cornelissen, director of housing at Consumer Federation of America.
Across the country, about 1 in 13 homeowners do not have homeowners insurance, according to a report by Consumer Federation of America last year using data from 2021. That finding corresponds to about $1.6 trillion worth of uninsured homes, DeLong said.
It is not yet known how many of the people who lost property in the recent Southern California wildfires didnt have homeowners insurance, but we know its going to be more than those in the past, said Amy Bach, executive director of United Policyholders, a non-profit group that provides consumers with insurance information and resources.
Not having homeowners insurance, its similar to going without health insurance. Right? It's very risky, Cornelissen told ConsumerAffairs. Its usually not a choice that people make so much as it is a choice that's forced upon them, she added later.
What to do?
People may have to abandon policies because they cant afford rising premiums or their insurance may not renew their policies because they live in high-risk areas, experts say. Or it may be because of another underwriting issue like their homes dont meet certain guidelines, DeLong says. The big question is what can you do if this happens to you?
ConsumerAffairs spoke with consumer advocates and an insurance broker to find out more about what options consumers have in this circumstance. Here are their suggestions:
Watch for the non-renewal notice
It's more common for insurance companies to raise your premiums than to not renew your policy, Cornelissen said. Homeowners, then, are forced to find something they can afford. But if your homeowners insurance declines to renew your coverage, they are required to give you a heads up, DeLong said. That notice can vary anywhere from 30 to 120 days prior to it taking effect.
Read the notice and try to find out why your insurance company didnt renew you, DeLong suggests. If they didnt provide notice, reach out and demand an explanation. You need to make sure you didnt accidentally miss a payment or there wasnt some sort of error. Because insurance companies are big and they can make considerable mistakes, he said.
People have a lot more power than they think they do when it comes to their insurance,added Karl Susman, owner of Susman Insurance Agency in Brentwood, Calif. He took a break from fielding calls from clients helping them navigate the claims process to speak to ConsumerAffairs.
Just because you get a non-renewal letter does not mean the companys reasoning is sound, Susman explained. Insurance companies are using a lot of new tools such as aerial and drone footage. They could mistake a skylight for a hole in your roof, he said. Call them and advocate for yourself.
Price shop
If you confirm theres no mistake in the companys reasoning, start shopping for a new policy, DeLong says. Compare quotes online. If you have a mortgage, you will be required to have a homeowners insurance policy. If you begin to look immediately, you will improve your chance of finding a good option, Susman emphasizes.
However, Bach, from United Policyholders, cautions: Its harder to shop now than ever in the history of insurance in the United States.
Its more difficult, but not impossible, Susman said. Just because one particular private insurance company decides they don't want to keep a risk, that doesn't make the property or the client uninsurable, it just means they have to go somewhere else.
If you have an insurance agent, its well worth your time to try to get their help because they may know of smaller companies that might have policies specifically tailored to help you, DeLong said.
You may also consider looking into a surplus lines insurer, which is an insurance company that isnt licensed in the states in which it operates. The downside is youll usually be charged higher insurance premiums, DeLong says.
Ultimately, if you cant find insurance, your lender will place you on lender-placed insurance, Cornelissen warned. It only protects your lender and not you, but you still must pay for it, she said.
Try to reduce your risk
Making strategic home improvements may help you reduce your risk, DeLong suggested. For example, if your homeowners insurance policy was not renewed because your home is located in an area that is at high risk for wildfires, you could clear the brush around your home or install a roof and/or porch made of less flammable materials to lower your risk, he said.
Keeping up with your home maintenance may also be helpful, he said, because insurers sometimes drop policies if the home is in a bad state of repair.
Even if you cant get the policy reinstated, if you improve your homes conditions that could help you get another insurance policy, DeLong said.
The downside is that these repairs can be expensive, he said. Some states offer mitigation programs that can help consumers make therepairs. Alabama offers the Strengthen Alabama Homes program where consumers can apply for grants of up to $10,000 to protect their homes. In California, insurance companies are required to give people discounts if they undertake mitigation measures to reduce the wildfire risk, DeLong said.
Individual actions can be very helpful, but community actions can generally be even more helpful, he explained.
Safer From Wildfires is a program, primarily in California, that encourages people to protect their property and groups of residents in various neighborhoods to work together to reduce their risks from wildfire by creating a Firewise community. The National Fire Protection Association manages the Firewise USA program. Insurance discounts may be available for those who are successful, but they are not easy to get, Susman says.
If your home is in a Firewise community, it will absolutely give you more options for insurance, he said. The caveat is that its hard to get compliance out of an entire neighborhood, he noted.
Pay your premium
It may sound obvious but pay your monthly premiums. Insurance companies may choose not to renew clients for several reasons, DeLong said, one of which is failure to pay. If you dont have insurance and your home is damaged or destroyed, youre going to be mostly on the hook for repairing or replacing it.
Be mindful of how many claims you file
If you file frequent claims to your homeowners insurance, your premiums could go up or the company could cancel your policy, DeLong says. He doesnt like it people should be able to file legitimate claims and get the payments theyre owed, he says but the insurance companies are also trying to evaluate risk, and they view people who have filed multiple claims generally as riskier to insure.
If your sink overflows and its a couple of thousand dollars in repair costs and you file a claim, you could lose claim-free discounts or even not get renewed, Susman warned. But if theres a large event like a wildfire, flood or hurricane, "that's not the time to skimp on putting in claims and working with your insurance company.
Another tip is that if youre looking for discounts or ways to save money, pick up the phone and tell your insurance agent or broker that you want them to shop around for you, Susman said. Sometimes people think it automatically happens, but it doesnt.
If all else fails, consider a FAIR plan
If you are unable to get private insurance, there is a last resort option a Fair Access to Insurance Requirement (FAIR) plan. These are state-run programs, but they are not government or state-funded. Rather, they are funded by private insurance companies doing business in a given state. A number of states have them although not all. The California FAIR Plan allows homeowners who have been denied private homeowners insurance access to basic fire insurance. This safety-net plan is also generally expensive, and considered one of last resort, according to experts.
The bottom line is if you dont already have it, try to get home insurance coverage. Without it, you could be on the hook for a lot of money if disaster strikes.
For most Americans their home is their largest source of wealth, right? It's their greatest financial asset. So, there's a lot at stake, Consumer Federation of Americas Cornelissen said.
Photo Credit: Consumer Affairs News Department Images
Posted: 2025-01-30 20:39:48
