California Increases Insurance Coverage Protections in Wildfire Zones

Thousands of homes have been destroyed in recent years by devastating wildfires across the state of California. Those claims have cost insurers, who responded by dropping fire insurance policies for many homeowners who live in wildfire-prone areas.

Over a million California homes are now protected under a new state order that temporarily bans insurance companies from dropping customers in areas affected by the recent wildfires. It is important for insurance agents to stay up on the issue, particularly as to how it relates to personal lines coverage going forward. 

The Protection Takes Cover

There has now been issued a moratorium covering about 1000,000 homes affected by recent wildfires, additional homes have been covered in burn areas in San Bernardino, Riverside, Ventura, Solana, and Contra Costa counties.

The moratorium lasts for a year, and it only covers those who live either inside or next to the perimeter of one of 16 wildfires that burned in California in October.

Thousands of homes have been destroyed in recent years by devastating wildfires across the state. Those claims have cost insurers, who responded by dropping fire insurance policies for many homeowners who live in wildfire-prone areas.

Insurance Industry Happenings

The insurance industry has said annual losses from wildfires are not sustainable.

In California, those who are not able to purchase home insurance through no fault of their own can purchase plans from a state-mandated insurance pool. But policies sold through the California Fair Access to Insurance Requirements Plan are often limited to fire damage, forcing people to purchase separate plans to get coverage for things other than fires.

The FAIR Plan has been ordered to begin selling comprehensive policies by the first of June in order to cover many of the other problems, which include theft, water damage, falling objects, and liability. The plan had also been ordered to double homeowners’ coverage limits to $3 million.

However, the California FAIR Plan Association has now sued its Insurance Commissioner, arguing his order is illegal. It said state law only requires the plan to sell basic property insurance. It argued that the order would hurt the private insurance market, which conflicts with the FAIR Plan’s state-mandated goals of encouraging “maximum use” of the “normal insurance market.” Known as the ”insurer of last resort,” the FAIR Plan has been growing over the past few years as wildfires have become bigger and more frequent due to climate change. Insurance agents can only benefit from remaining as informed as possible on the matter.  

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