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Some Important Information About Home Insurance in California

As we all know, fires have been a big concern in California but in recent years, the frequency and intensity of the fires have escalated and insurance companies are taking a second look at what and where they will insure. Last week, State Farm and Allstate announced they will no longer sell new home insurance policies in California because of wildfire risks and an increase in construction costs. The California Association of Realtors published some facts about this latest development so I wanted to share some of their key points.

  1. State Farm and Allstate will continue to service and renew policies of existing clients in the state and will continue to offer new auto insurance policies. However, they will not be issuing any new property insurance policies for the time being in California.

  2. In certain high-risk areas of the state, there are very few insurance companies willing to write new policies. In some higher risk areas, State Farm was the last private insurance company writing policies. In those areas, unless the Insurance Commissioner is successful in its effort to get more private insurers to write policies in such areas, the generally more-costly California FAIR plan may end up being the only property insurance available.

  3. State Farm stated that it made the decision “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Allstate said the company "paused" its offerings "so they can continue to protect current customers." State Farm and Allstate's decision is not necessarily an indication of what other companies will do.

  4. There are still a wide range of companies writing policies in California. However, those willing to write new policies in higher risk areas in particular are declining and as stated above, with the departure of State Farm and Allstate, those in more high-risk areas may have no option than the FAIR plan.

  5. The California Dept. of Insurance provides several information guides, tips and tools to help you understand home/residential insurance so that you can make the best decision for their situation. You can also call the California Dept. of Insurance Consumer Hotline for assistance.

As a buyer, checking on home insurance should be done as soon as you have an accepted offer and remember....never waive or release your investigation contingency until you have consulted an insurance agent and can confirm that the property you want to buy, can be insured. Without insurance, a lender will not fund the loan.

Source: California Association of Realtors (Newsline June 5, 2023 - State Farm, Allstate stop selling home insurance to new customers in CA)


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