Dropped Homeowner’s Insurance Policies: The New Norm in Tahoe?
If it hasn’t been a problem for you yet, Homeowner’s Insurance will likely have some hurdles for you soon. The Tahoe and Truckee area almost completely lie in either High or Severe Fire Hazard Severity Zones with 56% lying in Severe Fire Hazard. Some communities find themselves 100% in the Severe Fire Hazard Zone, these being Kings Beach, Dollar Point (part of Tahoe City), Tahoma, and Tahoe Vista. With the recent high occurrences of devastating fires home insurers have been paying attention and their response is equally devastating.
Rate increases and and non-renewal notices on policies are the norm in which we are finding ourselves in currently. A large number of “admitted’ carriers are issuing non-renewal notices for their entire portfolio in our area including State Farm and AAA. Even Lloyd’s of London, a long-time go-to for difficult cases, is issuing non-renewals. The home insurance market will stabilize in time, and until then we should all expect to see huge swings in rates, even from one day to the next.
WHAT IS HAPPENING?
The high frequency of devastating fires is the main culprit in the insurance crisis we have on hand. 5 of the top 10 most destructive fires in CA history have occurred since 2017: the Thomas Fire (Ventura County, Santa Barbara) in Dec, 2017; the Nuns Fire (Sonoma County) in Oct, 2017; the Carr Fire (Shasta & Trinity Counties) in July, 2018; the Tubbs Fire at #2 on the list (Sonoma) in Oct, 2017; and #1 on the list and most recent is the Camp Fire, or Paradise Fire (Butter County) in Nov 2018. A 6th on the top 10 list, the Valley Fire (Lake, Napa, & Sonoma Counties) occurred in Sep 2015.
Another layer of the current home insurance market spikes can be attributed to the current reinsurance climate. Insurance companies spread the cost of risk out to many insurance companies by purchasing insurance on the policies it writes. This is called reinsurance. A lot of reinsurance companies are international and as fire risk and damage has risen the reinsurance companies don’t know what to do about their policies.
In California we have two different types of insurance carriers; “admitted” and “non-admitted”. Admitted carriers issue policies that are backed by the State of California for up to $500k per policy. Admitted carriers have more flexibility to change rates with market changes. Non-admitted carriers do not have California backing. Their rates are likely to be higher but are less susceptible to market changes and therefore offer more of a guarantee of rates over the long-term. California state law requires that you receive 3 declinations from admitted carriers before you can get a policy from a non-admitted carrier.
As more and more admitted carriers are getting out of the high and severe fire hazard zones, more non-admitted carriers will eventually fill the gap. In the meantime there is an incredibly high number of people trying to find insurance either for new policies or to replace existing policies.
WHAT CAN YOU DO?
The biggest piece of advise from insurance brokers is: if you have insurance, keep it, even if your rates increase. There is some tweaking to your current policy that you can do to improve rates by customizing limits and bumping up deductibles. In addition the following items can give you discounts on your insurance and might be worth installing:
-centrally monitored alarm system
-interior fire suppression system
-electrical panel and other electrical upgrades
-heating upgrades
-under 25 yr old roof (this is the biggest one!)
In some cases getting your property inspected and in compliance with Defensible Space parameters can either get you discounts or in some cases has convinced a carrier to keep a policy rather than dropping it.
Another thing to keep in mind when shopping for insurance is to work with a Tahoe or Truckee area broker. Out of area brokers are issuing $500k policies for $1 mil+ homes because they are undervaluing the high replacement costs up here due to snow load codes, labor costs, and heightened material costs.
If your policy does get dropped there is the CA Fair Plan which insures a maximum value of $1.5 mil though it is very limited. Because there is no liability you will need a 2nd policy to fill in the gaps. Your roof will need to be 25 years in age or less to qualify. In some cases they can issue policies for older roofs but with more limitations. Shopping for non-admitted carriers is another option, but as stated earlier, you will need to receive 3 declinations from admitted carriers first.
If you are searching for new policies be sure to reach out to local insurance brokers. They can shop a lot of different carriers and as pricing changes day to day from company to company they have a good idea of what’s happening and who to call next. A few referrals: Aegis Insurance in Truckee, Truckee Community Insurance, Sierra Insurance Associates and LP Insurance.