By Guest commentary Friday, August 16th, 2024

By Salena Bracamontes

It’s become an all-too-common scenario for California homeowners. A letter arrives in the mail from your home insurance company informing you that your coverage won’t be renewed. 

You did nothing wrong. 

Maybe you’ve had the same insurance company for decades and never filed a claim. 

Yet now you’re faced with having to quickly scramble to find alternative coverage.

Or maybe the letter tells you that your premium is about to double. You’re already struggling to pay for groceries, gas andproperty taxes that have risen due to inflation and higher home values. 

Interest rates on your credit card are up. 

But your income hasn’t changed. 

How are you going to afford a giant leap in home insurance costs?

I hear from people every day who are facing these scenarios. They call me crying, desperate for help. 

Some worry they won’t be able to find new insurance. 

Others plan to drop the plan they have because they can’t afford it, and instead take the enormous risk of going uninsured. 

I also get calls from homebuyers unable to close on their dream property because they can’t find an insurer to secure the purchase.

While there are no easy answers to these challenges, there are steps that homeowners and homebuyers can take to try to find relief. 

There are also important precautions to take to avoid putting your finances and property at risk.

But first, let’s explain what’s happening. 

WHY ARE RATES GOING UP?

California is in the midst of a home insurance crisis. Carriers are pulling back from the market and drastically raising rates. 

The main reason is the state’s increasing risk of wildfires, which have destroyed thousands of homes across the state over the past few years. 

Even people living outside of wildfire-prone areas are now seeing their premiums affected as insurers adjust to the new reality.

Insurance Commissioner Ricardo Lara, Gov. Gavin Newsom and state lawmakers are all working to address the crisis. 

Let’s hope they come up with a robust solution soon. 

In the meantime, here are tips I have been sharing with clients and others who call me asking for help:

TALK TO YOUR INSURANCE AGENT

Before you do anything drastic like canceling your insurance plan or giving up insurance entirely, call your broker or agent. Ask if there’s anything they can do that would allow you to renew your plan (if you’ve received a nonrenewal notice) or to bring down the premium. For example, some insurers are now offering discounts to homeowners who take action to reduce fire risk, such as by clearing brush and vegetation around their homes. It’s unlikely this will bring your insurance costs down to prior levels, but it’s better than not having insurance at all. Keep in mind that other insurance companies have also raised premiums, so there’s no guarantee that you will find a better rate elsewhere.

ASK FOR RECOMMENDATIONS

If your agent can’t help you keep your current insurance, ask if they can recommend another carrier to you. Many agents have been collaborating with each other because of this crisis, and they may have an alternate option or be able to refer you to another broker who can help. Most of us understand how difficult the current situation is for people, and we want to do our best to assist clients in any way we can, even if that doesn’t result in business for ourselves. 

CONSIDER CALIFORNIA’S FAIR PLAN

This is the state’s home insurance plan of last resort, providing an option for homeowners who simply can’t find insurance elsewhere. It’s seen a 137% increase in policyholders since 2019, reflecting the current reality for homeowners. The plan isn’t perfect. It provides limited coverage and tends to be more expensive than conventional property or fire insurance. You will also need to purchase supplemental coverage to achieve the kind of comprehensive protection you would have under a commercial plan. Nevertheless, I have seen clients obtain insurance through the California FAIR Plan that they are happy with and that meets their needs. To find out more about this option, visit the state’s California FAIR Plan website, where you can search for licensed brokers in your area. You can also ask your existing broker whether they offer the California FAIR Plan or can connect you with an agent who does.  

STAY CAUTIOUS

Unscrupulous individuals and companies have been cashing in on the current crisis by defrauding consumers. The scam goes like this: You receive a call or a letter from a carrier you’ve never heard of, offering a rate that sounds too good to be true. To get the insurance, you’re asked to pay the full premium upfront, which could be thousands of dollars. A few months later, the company goes bankrupt. Your home is no longer insured, and you have no way to get your money back. To avoid falling victim to this type of fraud, make sure any insurance agent or broker is licensed by the State of California. You can check license information on the Department of Insurance website. It’s also preferable to go with an “admitted” insurance company, which means the company files its rates and specific requirements with the state. You can look up companies by name here to find their status or get advice from a broker you trust.

Ultimately, it will take regulators and insurance companies working together to resolve this crisis. 

In the meantime, lean on your existing carrier or broker to look for a solution, and avoid taking drastic action or falling for scams that could worsen the situation. 

Through communication and perseverance, you can find a way through this.  

Salena Bracamontes is the Agency Owner / CEO at Salena Bracamontes Insurance Agency Inc.