With the rapid and terrifying growth of wildfires over the last several years in California, insurance companies have raised the costs of fire insurance.
The reason for the increase in prices stems from reinsurance companies concerned about the uptick of policies sold to consumers in disaster-prone areas. They charge insurance companies a higher premium which many companies have passed onto their customers.
Why the switch?
A majority of insurance companies consider wildfires to fit into a “secondary peril” category. Other natural disasters that fall into this grouping include drought, tornadoes and hailstorms. With ever-changing climate challenges, fire hazards are higher than ever before. With an exponential increase in liability, insurance companies foresee large losses to compensate for ever-growing damages.
When it boils down, the concern of protecting insurance companies from issues like bankruptcy and systemic damages are actively harming consumers all over the state. In one scenario, a man’s fire insurance policy was unexpectedly canceled. When he inquired about the problem, he learned that if he wanted to have fire insurance on his home, he would need to pay $4,000 instead of $1,000.
What about the future?
Homeowners have the right to affordable insurance for their homes. With the ever-present risk of wildfires, everyone is scrambling for answers and weighing their options for staying in California. While officials grapple with solutions to prevent an insurance shutdown and taxpayer disadvantage, homeowners continue to pick up the pieces and determine how to afford the long-term protection of their homes.
Source: The Mendocino Voice, “As California fire insurance prices skyrocket, residents ask themselves: should I stay?,” Lana Cohen, Nov. 30, 2020