Getting Homeowner’s Insurance in Rural California is Getting Tougher in 2015

Recently, rural properties in California have had a harder time qualifying for homeowner’s insurance. After the big fires in 2014 (and the not-so-big Black Bart Fire locally), many insurance companies have declined new requests for coverage and even opted not to renew existing policies.

Why? Because the Department of Insurance disallowed a rate increase for insurance companies hit by claims resulting from those fires. So the insurance companies responded by reducing risk—choosing not to offer insurance in areas deemed more likely to suffer a loss. Consequently, if your current home is in a rural setting with a moderate fire risk and your homeowner’s insurance renewal is coming up, you should check well in advance of the deadline to make sure a nasty surprise isn’t headed your way. If you are buying a home, check on insurance as soon as you decide on a property. You’ll gain two useful pieces of information: 1. Whether you can get insurance and 2. Whether you’ll have to sell your firstborn to pay for it.

By the way, if flood insurance is required and you didn’t get a flood certificate when you bought the property, now might be a good time to verify that you are, in fact, in a flood zone and therefore need flood insurance. You might just be leaving money on the table and not know it.

Whether you’re a homeowner or renter, I strongly recommend investing in homeowner’s insurance. Why? Because it can help prevent a natural disaster or other crisis from also becoming a personal financial crisis. A standard policy typically covers loss from fire damage, which is what most people think of when they think of homeowner’s insurance. It also covers things like having a computer stolen out of your car or the hospital bills for the Girl Scout slipping on your driveway when selling cookies or the UPS guy getting bitten by your dog. It will often cover acts of vandalism and even worker’s compensation for a landscaper who is injured on the job at your house. The only difference between a homeowner’s policy and a renter’s policy (both are called a homeowner policy) is that the structure is included in the coverage if you own your home.

A home’s insurance value is based on the cost to rebuild the house, not the market value. If you under insure the property, the insurance company will only pay a portion of your loss even though the loss is less than the stated amount of insurance. (Otherwise we would all insure our property for less than full value because the odds of a total loss are very small.) You can pay less for insurance if you have less coverage or a higher deductible, but you’re taking a risk.

Be sure you understand what’s covered under your policy. Flood and earthquake insurance are separate and cost more. If your home is in a flood plain (even a 100-year flood plain that hasn’t flooded in anyone’s memory), the law will require your lender to require flood insurance.

Earthquake insurance is often very costly, and honestly, hard for me to recommend. Typically, there is a 15 percent deductible. This means if your house is worth $300,000, you’ll pay for the first $45,000 worth of damage. That will cover a lot of damage. If the earth opens up and swallows everything you own, then you’ll wish you had earthquake insurance. Otherwise, you’ll be paying expensive premiums and still be on the hook for tens of thousands of dollars if an earthquake hits.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.