Weighing Risk vs. Reward

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In case you missed it, home insurance plays a crucial role in the buying and selling process, especially in areas prone to natural disasters. We can help you understand the financial and other implications on both sides of the process, especially as insurance companies reconsider their policies in high-risk areas.

CHIC (Pearl)

Buyers should use risk assessment as their North Star. You might reconsider purchasing an otherwise wonderful home in an area frequently affected by natural disasters due to the high risk of damage or destruction in a constantly changing environment. A lot of the decision will come down to the cost and availability of insurance. Lenders typically require home insurance as a condition of your mortgage, and if you can’t get a policy, you may not get the loan. It’s a difficult balance, so you’ll need to be committed to the process if you want to make it work.

GEEK (Kevin)

Risk mitigation is the name of the game for sellers. Changes in insurance policies and regulations can have long-term effects on the desirability and value of properties in high-risk areas prone to disasters like wildfires and earthquakes. On top of that, you may be required to disclose past insurance claims related to natural disasters, which might sour buyers on the property. You can help tip the scales by bringing your home’s safety measures up to date, but that may not create the nexus point you need between buyer interest and selling challenges.

Running the Carrier Numbers

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When it comes to home insurance, it’s one thing to find a policy that fits your home. It’s another to find a policy that fits your budget. Surplus lines carriers can check both boxes. These “non-admitted” carriers don’t come with California Insurance Guarantee Association protections. But they’re a flexible option if your current provider kicks you to the curb. Just run the numbers using a service like A.M. Best to make sure they’re financially sound.

Fighting Fire with Insurance

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Insurance companies are shying away from new policies in California and raising rates on existing customers after years of wildfires have devastated their bottom line. How can you keep your current plan or find a new policy that fits your budget?

CHIC (Pearl)

If your insurance company tells you they’re not renewing your policy, don’t panic! You’re entitled to 45 days notice before the policy expires, which gives you time to shop around for a replacement policy or renegotiate with your current provider. If you don’t receive proper notice, don’t hesitate! Call the California Department of Insurance (DOI) at 1-800-927-HELP or go online to insurance.ca.gov and check to see if your policy has a guaranteed renewal provision. And if you think you’re out of options, you’re not. Call the California FAIR Plan at 1-800-339-4099. FAIR warning: This policy can be expensive, and it only covers certain losses, so you may need to buy Differences in Conditions (DIC) insurance too.

GEEK (Kevin)

Who wants to spend all day and night and part of the weekend filling out forms and running themself ragged with research? Okay, some of us love this kind of stuff. But for the rest of us, I recommend getting an insurance agent. The DOI website offers a tool to help you find an agent or broker near you, as well as other resources. Before you decide on an agent, check to see if they work exclusively with one insurance company or have access to multiple carriers so you know you’re getting the best deal. And come prepared with questions for your agent such as: What is covered and what is not? Can I get the full cost to rebuild if disaster strikes? Does it cover demo or debris removal? Is there a coverage limit?

Uninsurable?

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As building costs, fraud, and risk from wildfires and other climate disasters continue to rise, some insurance companies are backing away from issuing new homeowner policies in the Golden State. What does this mean for potential buyers and sellers?

CHIC (Pearl)

If you’re thinking of buying a home in California, you should get a head start on finding a home insurer who will give you a good policy at an affordable rate before making an offer. Understanding your annual expenses is a key factor in determining how high you’re willing to go.

GEEK (Kevin)

Insurance companies aren’t nonprofits, and they’re not stupid either. They already know the risks of insuring properties in earthquake country, and the recent trend of wildfires hasn’t made the equation any more favorable to them. In other words, don’t hate the player, Hate the game!