Homeowners Are Losing Insurance Coverage After California Wildfires

Here's what to do if you've lost your coverage because your property’s been deemed too “risky.”
Photo of wildfire in California

Homeowners in California may be left without insurance following a year-and-a-half of devastating wildfire losses.

Wildfires caused nearly $12 billion in damages in 2017, making it the costliest year for fires in state history, according to the California Department of Insurance (CDI). These losses show no sign of stopping in 2018.

"Over a decade or so, we're going to have more fires, more destructive fire, more billions that will have to be spent on it," said California governor Jerry Brown in a press conference. "All that is the new normal that we have to face."

Currently, there are 18 large wildfires ravaging the state. The Carr fire, which has been burning across Northern California since July 23, has caused seven deaths and less than half of it is contained. Meanwhile, the Mendocino Complex fire has burned more than 283,000 acres of land, making it the largest in state history. Firefighters have less than a third of it under control.

To cope with these losses, homeowners insurance companies, such as Liberty Mutual, have chosen not to renew policies for some undamaged properties in high-risk areas. Homeowners have protested these nonrenewals, but there's not much they can do. As long as an insurer follows its underwriting guidelines—which require it to base its decision to withdraw coverage on an objective evaluation your property's risk—and as long as these guidelines are consistently applied to all properties evaluated, no law explicitly prohibits them from dropping your coverage.

What to do if my homeowners insurance coverage is dropped?

If you live in a region endangered by recent fires and you receive a notice of nonrenewal from your home insurance company, you'll have 45 days to find replacement coverage. Just because you've been dropped by one insurer doesn't mean you won't be able to find coverage from another. Insurance companies maintain different risk profiles and standards for what makes a property insurable.

But if you know you are in a high-risk zone, finding coverage may be difficult, and it's likely you'll face higher premiums than you were previously paying. That's why it's important to begin your search immediately.

One of the best ways to combat increased rates is to compare quotes from several insurers in your area. By beginning your search as soon as you receive a notice of nonrenewal, you'll have time to research several insurers before your current policy expires.

If your current policy is close to expiring—or if that date has already passed—and you still haven't been able to obtain coverage, you should contact the California FAIR Plan. The FAIR plan offers insurance for high-risk properties. However, it only provides basic coverage, so if you purchase a FAIR plan, you should still look for supplemental insurance to provide liability protection.

Daniel Caughill

Daniel is a Staff Writer at ValuePenguin, covering insurance, retirement and other personal finance topics. He previously wrote about compliance and best practices for K-12 school districts at Frontline Education.

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