Living in California has never been cheap, but the rampant wildfires and high rebuilding costs in the state are making it even more difficult for homeowners. Some have already felt the effects with home insurance rate hikes over the last several months, and unfortunately, that trend doesn’t appear to be ending anytime soon.
More rate hikes could be on the horizon, squeezing Californians’ budgets even further. Here’s what homeowners need to know.
Which companies are requesting rate hikes?
State Farm, the largest home insurer in the state, stopped selling homeowners insurance policies to new California customers, citing the increased risk of wildfire claims and high rebuilding costs for its decision. And it’s requesting the California Department of Insurance approve a 30% rate hike on its existing homeowners insurance policies in the state, following an approved 20% rate hike last December.
It’s not the only one. Allstate is also requesting a rate increase of 34% on its homeowners insurance policies in the state. And Farmers, like State Farm, is also limiting sales to new California homeowners.
It’s not clear if the California Department of Insurance will approve these rate hikes, but increases remain a possibility. And if other companies choose to exit the state’s home insurance market, it could leave customers with fewer options going forward. It’s not a pretty picture. But there are ways homeowners can try to keep their costs manageable.
What California homeowners can do
Here are a few steps California homeowners can take to keep their homeowners insurance costs from getting out of control:
- Shop around: It’s best to get rates from three to five companies before deciding on one. Price is obviously an important concern, but focus on the available coverage and customer reviews as well.
- Consider using fire-resistant materials: If building a new property or replacing an existing roof or siding, consider using fire-resistant materials. This decreases the risk of wildfire damage and may qualify the home for discounts with some insurers. A quick call to an insurance company can confirm which materials qualify for savings.
- Choose a higher deductible: Going with a higher deductible reduces monthly premiums, sometimes significantly. However, doing this increases the out-of-pocket costs in the event of an accident. When possible, it’s best to save for this in a high-yield savings account before increasing the deductible.
Be careful about reducing coverage
It might be tempting to reduce coverage to gain a more affordable premium, but this could be dangerous, especially to those who live in areas at high risk of fire damage. Failure to purchase enough insurance could lead to massive out-of-pocket costs if the home is destroyed in a fire. Insurers may not have to pay up to the policy limit, either, if the homeowner purchases a policy for less than 80% of the home’s replacement cost.
Even homeowners who think they have enough coverage to replace their home may want to take another look. Building costs can rise quickly and this might result in a need to purchase additional coverage. It’s best to do this as soon as possible to ensure the home is adequately protected if a wildfire comes calling.
Our picks for best homeowners insurance companies
There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.
