California has experienced more than 1,600 wildfires so far in 2023, burning more than 4,000 acres. But this is only part of the devastation these natural disasters cause. They can also destroy entire communities and lead to expensive insurance claims. And homeowners aren’t the only ones feeling the pressure.
State Farm recently announced it will temporarily stop selling new homeowner insurance policies in California due to the high risk of wildfires and rising rebuilding costs. Here’s what homeowners with State Farm insurance or those looking for new coverage need to know.
Why State Farm Doesn’t Sell New California Homeowners Insurance Policies
State Farm has decided to temporarily stop selling new homeowners insurance in California after assessing the risk of California’s wildfires and the cost of building construction. The company will continue to sell private auto insurance policies in the state.
State Farm said it feels this is necessary for the time being to maintain its financial strength and will continue to evaluate the situation over time. Selling homeowners insurance policies may resume in the state, but only time will tell.
What this means for California homeowners.
California homeowners who are already insured through State Farm will not lose their coverage and need not worry that their policies will not be renewed when their current term expires. The company will continue to provide coverage and service inquiries to existing customers as always. But the increased risk of wildfires in the state means these customers will pay more if they hope to renew their policies.
Homeowners looking for new coverage still have about 115 homeowners insurance companies. But people who live in high-risk areas for wildfires may end up paying more with them in terms of increased risk and higher construction costs.
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The state of California is doing its best to control this by mandating that insurers award discounts on their policies to businesses and homeowners who take wildfire prevention measures. But discounts can vary from one company to another, and the company that offers the most discounts isn’t always the most affordable. That’s why it’s a good idea to get quotes from multiple companies before purchasing a policy.
Homeowners who haven’t done so should check their coverage and make sure the policy limits are sufficient to completely rebuild the home. These days, they may need to purchase additional protection to account for the high rebuilding costs. Those with questions about how much coverage they need should contact their home insurer or local builder to get an estimate of what these costs might be.
What is California doing about this?
California government can’t mandate State Farm to sell homeowners insurance policies to its residents, but it’s doing its best to make things easier for customers affected by the surge in homeowners insurance due to the wildfires. In addition to requiring insurers to reward customers who take wildfire prevention measures, it imposes a one-year mandatory ban on non-renewals and cancellations.
Basically, if the governor declares a state of emergency because of a wildfire, insurers can’t use that wildfire as an excuse to cancel or renew homeowners’ policies for at least one year after the disaster. This allows homeowners to focus on rebuilding their home without worrying about needing new insurance coverage right away.
The state also provides Correct planIt is a basic fire insurance cover for people living in areas prone to wildfires. These plans are more expensive than traditional homeowners insurance policies, but at least they offer some protection to those who struggle to get coverage from traditional companies.
Californians have many options for homeowners insurance coverage. But shopping around before buying a policy has never been more important. Each company evaluates risk slightly differently, and some insurers may charge a homeowner much less for the same coverage.
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