In just the last couple of weeks, two insurance industry giants have announced they will no longer be accepting new homeowner and property insurance policies in California.
Allstate and State Farm both stated that the risk of wildfires and inflation drove them to stop accepting new homeowner insurance applications in the state.
“We're very blessed. We're actually on the coast in Del Mar, and because a lot of the insurance companies are saying no to homeowners, we're very fortunate to actually still have insurance," said Ellen Osinski, who lives in Del Mar.
In a statement, State Farm said, “State Farm general insurance company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
“Insurance companies in California are managing their risk so that they can really protect their policyholders," said Janet Ruiz, Insurance Information Institute spokesperson.
According to the Insurance Information Institute, a nonprofit insurance industry trade association, says this is a response from insurance companies to better manage their current policyholders and have enough money to pay any claims in case of a natural disaster like a wildfire.
“The earthquake scares, the wildfires... so I could kind of understand how insurance companies are a little hesitant to insure. But then again, that's what they're for," Osinski said.
“Insurance companies aren't able to use the cost of reinsurance in the rate-making process, and insurance companies have an amount of money they can insure for and then they buy insurance for themselves in case of a catastrophe. So that pricing has gone up due to the same issues with inflation and wildfire risk," Ruiz added.
According to Ruiz, there are 116 insurance companies that are licensed to sell in California.
Another option is the California Fair Plan which provides basic fire insurance for high-risk properties when other companies may not accept the homeowner.
Ruiz adds that before you fall in love with your new home, do some research, talk to your local insurance agent, and make sure to compare insurance agencies.
