California Home Insurance Is Changing — What Homeowners Need to Know

By Frederic Rault, Goosehead Insurance

If you own a home or rental property in Southern California, you probably don’t need an insurance agent to tell you that the insurance market has become more difficult.

You can see it in your premium.

Over the past several years, homeowners have experienced significant increases in insurance costs, fewer choices from traditional carriers and, in some areas, difficulty finding coverage at all.

But there is finally some encouraging news: we are beginning to see more insurance options becoming available in California.

That doesn’t mean insurance is suddenly inexpensive again. It does mean homeowners may have more choices than they did a few years ago — and that makes it increasingly important to understand what you are actually buying.

1. More Insurance Carriers Are Coming Back

One of the positive trends we’re seeing is insurance carriers gradually reopening portions of their California business.

They aren’t necessarily opening everything at once. A carrier may begin by accepting landlord or dwelling-fire policies and later expand into owner-occupied homeowners’ policies.

For property owners, this is important.

If you rent out a home, for example, you generally need a landlord or dwelling policy rather than a standard owner-occupied homeowners’ policy. As more carriers enter or expand within this market, an independent insurance professional may have additional options to consider.

The California market remains challenging, but having more carriers willing to write business is a step in the right direction.

2. Condos and Townhomes Can Still Be Difficult

One area that continues to present challenges is condominium insurance.

Condos and townhomes can be particularly complicated because there are two different layers of insurance to consider: the HOA’s master insurance policy and the individual owner’s policy.

How a property is legally classified, what the HOA’s master policy covers, how the building is constructed and how much individual dwelling coverage is needed can all affect the available insurance options.

This is why insurance shouldn’t simply be approached as, “Who has the cheapest premium?”

Sometimes finding the right coverage requires looking carefully at the property and evaluating several different approaches.

3. Wildfire Risk Has Changed the Insurance Conversation

In Southern California, wildfire exposure has become one of the biggest factors affecting homeowners’ insurance.

Insurance companies increasingly use sophisticated risk models, property information, aerial or satellite imagery and inspections to evaluate individual properties. California’s Department of Insurance has also established its Safer from Wildfires framework, which encourages homeowners to take specific steps to reduce wildfire risk.

One of the most important concepts is the area immediately surrounding your home.

Start With the First Five Feet

Think about the first five feet around your house.

The goal is to reduce the opportunity for fire or wind-blown embers to ignite something next to the structure.

That can mean looking at:

• combustible vegetation and landscaping;
• leaves and debris around the house or in gutters;
• wood mulch;
• combustible fencing or gates attached to the house;
• materials stored against the building;
• vulnerable vents;
• unenclosed eaves; and
• other combustible materials close to the structure.

California’s Safer from Wildfires program specifically recognizes a five-foot ember-resistant zone, along with measures such as Class-A roofs, ember- and fire-resistant vents, enclosed eaves, upgraded windows and defensible-space maintenance.

Why does this matter from an insurance perspective?

Because wildfire mitigation may not only help protect your home — it may also help you qualify for insurance discounts or make the property more attractive to an insurance carrier.

4. But Does It Make Financial Sense?

This is where homeowners need to do some homework.

Cleaning leaves, removing dead vegetation and maintaining landscaping may be relatively inexpensive.

Replacing a wood fence with a noncombustible material is different.

So is enclosing eaves, replacing vents, modifying gutters, upgrading windows or making other significant improvements.

Before spending thousands of dollars solely to obtain an insurance discount, ask your insurance professional a very practical question:

How much will this improvement actually save me?

If an improvement costs $10,000 but only saves a relatively small amount on the annual premium, the financial payback may not be the primary reason to do it.

Of course, insurance savings aren’t the only consideration. Improving wildfire resistance can help protect your home and family. But homeowners should understand both the risk-reduction benefit and the insurance benefit before making a major investment.