If you’ve been paying attention to the news, you’ve seen it’s getting harder to secure California homeowners insurance. Farmers Insurance, the second most popular home insurance California provider, just announced their intentions to place a cap on new policies. This trails even stricter decisions by State Farm and Allstate to completely cease issuing homeowner’s policies in California. Even the California Earthquake Authority is getting in on the act, declaring a limitation on payouts for major quakes. Yet, there are still actions you can take if your California homeowners insurance coverage is disrupted. 

Details of the Farmers Insurance Announcement

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Farmers Insurance clarified their intent to cap new home insurance California policies at 7,000 per month. While they originally had no cap, they’ve estimated this figure as the volume of new policies they can feasibly write while remaining profitable. 

The cap went into effect on Monday, July 3. So, with Farmers Insurance issuing a cap and State Farm and Allstate pulling California homeowners insurance altogether, the question becomes: why? 

Why is the Home Insurance California Providers Once Offered Now Getting Pulled? 

Insurance providers have placed blame on a variety of factors including:

• Rising inflation
• Rising costs of reconstruction
• State limitations on insurance premiums
• Increasing risk of wildfire

That last bullet point comes supported by a UN report from earlier this year. The report predicts that wildfire occurrences will be up by 14% globally by 2030 as a result of climate change. 

Photo credit: U.S. Army Corps of Engineers Sacramento District

This leads to an insurance industry term, “demand surge”, meaning an increased need for repairs in the wake of a natural disaster. Anticipating more demand surges in the near future, insurance providers are pulling out of the most at-risk states. Cue the decline in California homeowners insurance policies. 

What Can You Do if Your California Homeowners Insurance is Disrupted?

The vacuum created by State Farm and Allstate has left several California homeowners without coverage. And while this can feel like a powerless scenario, homeowners with dropped policies can still take action. 

First, it’s important to recognize that the provider of your homeowners insurance California policy must issue a written statement of coverage termination 45 days before the policy ends. If you believe this right has been violated, you can reach out to the California Department of Insurance at 800-927-4357 (HELP). 

Asking the Right Questions

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You can also contact your insurance broker with questions that could help your situation. For example, some providers incentivize homeowners who engage in “fire hardening” to mitigate the chance of wildfire damage. 

You could also inquire whether your provider offers any additional coverage to compensate for unexpected cost surges. It’s also not a bad idea to check if you’re covered for expenses that cover costs related to mandatory evacuations. 

Finally, when speaking to your California homeowners insurance broker, check to see whether your policy covers the current market value. So many commodities regularly used in construction have risen in price since the pandemic. To make sure you aren’t undercovered, try to insure yourself beyond the quoted estimate. 

Your Last Resort: The California FAIR Plan

Photo credit: Jeff Turner

If none of the above helps you, then you may be in the market for the California FAIR Plan. Before we get into the specifics, we should stress that the FAIR Plan is designed as a last resort. Therefore, you shouldn’t expect to maintain coverage through the FAIR Plan indefinitely.

The FAIR Plan will only cover a maximum of $3 million anyway, so most would view it as an inadequate replacement for the kinds of home insurance California brokers offer. It also costs more than your average California homeowners insurance policy. But as a last resort, it can be a godsend for property owners unable to find homeowners insurance. 

Hope for California Homeowners

With Farmers Insurance capping its monthly policies, California homeowners insurance is harder to come by. But it’s not impossible. And the scene isn’t as destitute as it may seem. State law requires insurance companies to file for any rate surges, a process that can take months. Thus far, no such increases have been filed. 

Also, try not to worry too much if your neighbor gets an outrageous quote. Each home is different. Your neighbor could get denied coverage while you get accepted. Stranger things have happened in the world of home insurance California providers offer!