California Homeowners Insurance Update

Robin Corey, mba June 19, 2023

Recent changes in the insurance landscape in California will affect homebuyers and homeowners, going forward. One of the nation's largest homeowner insurance companies, Allstate, has made the decision to stop selling new home, condominium, and commercial insurance policies in the state. This follows a similar move by California's largest homeowner insurance provider, State Farm, which made a similar decision last month. Both companies are still honoring existing policies. These insurance giants have cited worsening climate conditions and rising building costs as reasons for their departure from the market.

In addition to the reasons mentioned above, Allstate also noted that state regulations and inflation have contributed to the decision to pause new policies in California. Interestingly, Allstate has taken similar measures in the past, such as after the Northridge earthquake in 1994 and in 2007, only to return to the California market later.
Considering these developments, it is expected that more property owners in California will turn to the FAIR Plan. The FAIR Plan is a state-offered "insurer of last resort" specifically designed for high-risk fire areas. Due to the worsening wildfires and the departure of traditional insurers from fire-threatened regions, the number of FAIR policies has more than doubled since 2018, with over 270,000 policies in effect as of 2022. It's important to note that FAIR coverage may be temporary and generally more expensive. As these policies are limited in their coverage, some Insurers will "wrap" another policy around the FAIR plan to provide more robust coverage.
Throughout these changes, I have maintained close collaboration with local insurers to successfully secure homeowner policies for my clients. Viable alternatives to the FAIR plan are still available, even in High Fire Hazard zones.
If you have any questions or concerns regarding insurance coverage for your property, we recommend consulting with an insurance professional who can provide you with the most accurate and up-to-date information. Please reach out if you would like a recommendation.
Sources: The San Francisco Chronicle, industry publications.

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