Lewis & Ellis, LLC

Many may struggle to find home insurance going forward

Property and Casualty Insurance
by Glenn Tobleman
Many may struggle to find home insurance going forward
Many may struggle to find home insurance going forward

Across the country, the harsher weather and natural disasters that bring with them significant damage and danger for homeowners have been increasing in intensity for some time. However, many people - who will only continue to face higher risk and more costs - may also find that the insurance coverage they relied on when needed isn't available to them, or has significantly increased in price. That may create a difficult financial situation for someone whose home happens to be in an area of increased hazard.

In Occidental, California - about 75 miles northwest of Oakland - homeowners have been battered by wildfires that are becoming increasingly common in the region, according to San Francisco television station KGO. The California state legislature recently passed a bill that prevents insurance companies from canceling the policies of people who live in areas where states of emergency were declared for at least a year. But now, more than a year after the fire that pummeled Occidental, homeowners there are receiving cancelation notices.

"Consumers often paid a higher premium because of the risks their homes faced."

In some cases, the policy providers would renew the coverage after it was canceled, but typically also noted to homeowners that another cancelation was probably in their future, the report said. Others who weren't so lucky as to have their policies renewed were usually able to find a new insurer, but paid a significantly higher premium because of the risks their homes faced, despite the fact that many have taken steps to reduce their own risk.

"It really doesn't matter what you've done individually on your home to mitigate your danger," Christopher McCloy, whose company connects consumers with insurance brokers, told the station. "If the insurance company doesn't like the risk for the entire area, you're being non-renewed."

What's the difference?
The risk that comes with wildfires is, of course, clear for property and casualty insurers, let alone homeowners, because a single such incident can level an entire neighborhood in a matter of hours. However, that nonetheless leaves homeowners in a situation where they either can't get insured or see their premiums skyrocket to levels that are  unaffordable for most consumers, according to the Nevada County Union.

One homeowner in nearby Grass Valley, California, recently told the newspaper her property insurance - which previously carried a $1,200 premium - had been canceled, the report said. Her insurer offered to provide alternative coverage for more than triple the cost: nearly $4,000, for partial coverage. Teresa Dietrich, real estate agent and president of the Nevada County Association of Realtors, told the newspaper that this is an all too common issue for the whole of Northern California, especially for those who are in increasingly close proximity to Paradise, California, where the infamous Camp Fire started in 2018.

Wildfires can be a big issue for homeowners' insurance.Wildfires can be a big issue for homeowners' insurance.

Another level of protection
At the same time, some insurers are facing their own problems, being forced to pull out of the areas affected by these incidents - due to the exposure they might face - or altogether folding, the report said. One such insurer provided coverage for more than 700 homeowners in Nevada County, and all are now working quickly to find new policies as soon as possible.

While brokers working in the area caution that not every policy they're likely to be able to obtain for clients is going to require a comparable premium to what they had before, the California legislature has some protection in place, the Union noted. California Fair Access to Insurance Requirements Plan is a marketplace set up by lawmakers to allow even the homeowners who can't get coverage to find at least some home insurance, though it's often considered a last resort in the state. However, because of the current trends, many believe it will continue to become more difficult to find affordable coverage as the market is currently constituted, so consumers would always do well to shop around.

"Landslides and mudslides cause $2 billion in damages each year."

Not just wildfires
Of course, it's more than just an increased risk of wildfires that has homeowners in California - and elsewhere - furrowing their brows over new insurance coverage, acfcording to Accuweather. In addition, landslides and mudslides are becoming increasingly common in certain parts of the country, and they cause about $2 billion in damages each year.

Unfortunately, many people may not realize that their standard home insurance policies do not cover damage from mudslides, landslides, earthquakes and flooding, the report said. In addition, mudflows - defined as rivers of water carrying heavy concentrations of mud onto what would have otherwise been dry land - are also increasingly common and yet uncovered by most standard coverage.

"The mudflow is a more liquid event, so what you have is basically runoff with suspended sediments with very small particle size," Dr. Chris Renschler, an associate professor of geography for the University at Buffalo's College of Arts and Sciences and director of the university's Landscape-based Environmental System Analysis and Modeling lab, told Accuweather. "We're talking about sand and maybe there are some boulders with it if the runoff is really large. The mudflow is surface water-infused, so that means the amount of runoff that is coming is basically triggering the detachment and the transport of the material."

Another cancelation risk?
Likewise, homeowners may face other coverage issues if they are in high-risk areas including the potential that, if they are forced to vacate their properties for prolonged periods of time, some may have their coverage canceled, according to Nashville television station WSMV. Many home insurance policies carry "vacancy clauses" that can go into effect if a home is empty for 30 to 60 days, in certain situations. These may not be enforced in high-risk areas that have been evacuated, but insurers should always try to work with consumers to verify the exact terms of their coverage before making any decisions. 

"As part of your end of the contract you have to remain living in your home and if you're not they could deny the claim because you're not fulfilling your part of the contract," Michael Eilerman, who works for Nashville Insurance Services, told the station.

Along similar lines, outreach from insurers is always important to simply let people know what's covered and what isn't, how much may be covered and so on, according to Value Penguin. One of the problems with home insurance coverage, for the layperson, is that it can be complicated and they may not always be fully equipped to understand all the ins and outs of it. The more they can work with their insurer - and vice versa - to help them understand the ways in which their unique risk factors impact their coverage costs and some of the conditions they may face, the more likely they will be to find something that works for them.

As with anything else to do with their home insurance, consumers will need to evaluate all the risks associated with their property and make sure they are adequately covered whenever possible. When they have all the necessary information, they are also equipped to make the best possible decisions about their policies and find a solution that works for them going forward, even when they live on properties at significant risk for wildfires, landslides and other common natural disasters.



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