Homeowners Insurance in Wildfire Areas

In many of the Western States, residential developments exist in close proximity to wildfire areas! Seeking a peaceful community away from the stress and busy urban communities is a treat but there is risk involved!

It has recently been noted that has been an increase in consumers complaining to the news media and the Department of Insurance regarding their concerns about obtaining affordable homeowners insurance in wildfire hazard areas. The majority of these issues have been noted in California.

There are more than 30 admitted insurance companies who underwrite residential insurance in California; it is no secret that the carriers are not obliged to accept any risk but most importantly have the responsibility to underwrite the risk presented to assure that the carrier won’t be confronted by adverse risk jeopardizing the company’s financial position. With the understanding of the aforementioned, it is fair to provide information to consumers regarding all the available options for insuring their homes.

Apart from the Preferred Market of carriers who most commonly underwrite the majority of homes in the state, there are also two other important options which are seldom known to those who purchase homes away from the urban communities for the first time; there is the possibility of buying insurance from the Non-Admitted Market (Surplus Lines) or securing coverage through the California Fair Access to Insurance Requirements (FAIR Plan).

If producers are unable to place a home with an admitted insurer, they may search the non-admitted market in order to locate an insurer willing to insure the consumer’s home. If the consumer doesn’t wish to pay the most likely much higher premium to purchase insurance through the non-admitted market, the California FAIR Plan is an option of last resort. The FAIR Plan provides only basic property insurance and is not to be compared to a Comprehensive Homeowners Insurance Policy.

Due to many gaps in coverage, some producers may not be willing to assist consumers in fear that in the event of a claim, the producer may be held responsible for providing such a basic form of insurance leaving the consumer in financial difficulty. Producers do have the obligation under the California Insurance Code (CIC) Section 10095.5 to either assist consumers in completing the insurance application for the FAIR Plan or provide the FAIR Plan’s toll-free consumer assistance number:  (800) 339-4099.

Before exploring alternatives, it is important to speak to a representative to make sure that none of the admitted carriers will accept the specific geographic location. All carriers have their own criteria and it is possible that a company may accept a home where many others will not.