How Wildfires Impact Insurance Policies
California residents are struggling to rebuild after wildfire damage. Over the last few years, residents claimed that insurance companies are pulling back their plans in areas where wildfire activity has increased.
Traditionally, insurance providers would survey the land and assess the potential risk of each home. Today, insurance providers are denying insurance renewals in areas where there has been a fire, even if the home up for renewal has not made a claim. Additionally, homeowners are having trouble finding plans from providers or their current rate has skyrocketed. A resident of Squaw Valley reported that her homeowners insurance rate jumped from $900 per year to $6,200 per year.
Residents who cannot find coverage on the voluntary market are forced to find coverage under the FAIR Plan at a much higher cost. Between 2015 and 2018, the number of people who enrolled in FAIR Plan policies grew my 177%.
Homeowners who file a claim with their insurance provider can wait to receive their money for up to 2 years. After the devastating Paradise Park fires, residents found that their payout delayed and insurance companies did not have the necessary funds to pay the cost of damage in full. In some areas, state laws require insurers to pay out the claims within 10–30 days, while some ask for insurance companies to pay out in a “reasonable amount of time.” In California, insurance companies have 40 days to either accept or deny a claim with the ability to request more time and continue to update the policy owner every 30 days.
What does this mean for homeowners in California? Homeowners should expect that their rates may increase or that they may be denied insurance. Residents should check if they are in an area at risk of wildfires and assess their current insurance policy to make sure that they have the best coverage.
