Homeowner’s Guide/Wildfire Insurance

By Bob Wallsmith Jr
2022 president
Santa Barbara Association of Realtors

Ever since the 2017-2018 Thomas fire and debris flow, the topic of homeowners insurance in the Santa Barbara/Montecito area has been a very big issue for people looking to get adequate home insurance. “My home is in a high fire danger area” and/or “Can I even get insurance on a new home I’m interested in” are just a few of the many questions that potential homeowners in the area ask.

There’s no easy answer, but there are some helpful ideas that can make the process a little less intimidating.

The first thing a potential homeowner should do is contact their local Trusted RealtorĀ® whenever they identify a home they are interested in. This is because the BrokerĀ® can contact local insurance carriers to determine the type and cost of insurance that may be available based on the home’s location and other important information.

The last thing a buyer wants to find out after falling in love with a property is that the insurance will cost them $30,000 or more per year. Better to find this out sooner rather than later.

This is important not only for homes located in the local foothills and mountains, but even down in the city. People are amazed when a home they are interested in is at high risk of fire, even though it doesn’t look like it would be dangerous. Housing on a street can vary in type and price depending on various factors such as slope, vegetation, etc.

Therefore, regardless of the home’s location in our area, the cost and type of insurance should be the first thing to do after establishing interest in a home.

The next step is for the insurance carrier to determine what type of policy is right for the home.

Homeowners insurance is guaranteed by law in California, regardless of the location of the home, etc. However, the cost of insurance and available coverage can vary widely.

There are three main types of insurance companies in California. The first is through an “admitted” company. These are companies like State Farm, Farmers, etc. that most people are very familiar with. These companies are heavily regulated by the state of California and mandate what they can and cannot charge for a particular policy. These companies also adhere to certain standards and are constantly evaluated for their ability to pay out on potential claims. Many lenders will require insurance to meet minimum rating standards and working with an accepted company can ensure that these standards are met. Each company’s ratings are public, so users can easily search for them. California mandates that a person must attempt to obtain coverage from three permitted carriers before they can obtain coverage from any of the following carriers.

Sometimes when an admitted carrier is unable to assume risk due to fire risk, you may need to seek insurance with the California FAIR Plan. The California FAIR Plan is designed as Fire Only insurance specifically designed for homes that recognized insurers will not accept. It was created as a temporary measure to ensure that all homes in the state could obtain fire insurance. It is important to note that the California FAIR plan is not a complete package by itself, it must be coupled with a Difference in Condition Policy (DIC) or companion policy to cover other losses that owners may face of housing.

Finally, you may find that the above two are not always viable options for certain homes. When this happens, you can often get coverage by working with an “unadmitted” or “excess lines” company. These companies often specialize in certain types of unusual risks that are considered undesirable by most insurers. Unauthorized companies are not regulated by the state and should be considered as a last resort. Before a non-admitted company can consider taking out a policy, they must receive a signed form proving that the home has been refused by three or more admitted carriers. Non-admitted insurers are not regulated by the Department of Insurance like admitted insurers, so they can often be more expensive, they can also withdraw from the state at any time, refusing to renew based on their risk tolerance levels.

Is that a lot of information? Absolutely! That’s why you need to find a trusted insurance agent who can help guide you through the insurance process, find creative solutions when needed, and support you, your local trusted broker, and your lender in the home buying process.

Bob Walsmith Jr. was born in Southern California and is a RealtorĀ® with Berkshire Hathaway HomeServices California Properties in Santa Barbara. During his time with the Santa Barbara Association of Realtors, Bob has served on the CORE Committee, the Education Committee, chaired the Budget and Finance Committee, and the Multiple Listing Service Committee. He is also on the board of directors of the Alpha Resource Center in Santa Barbara. Bob lives in Goleta with his beautiful wife Julie. When not working, Bob enjoys golf, fine wine, fine dining and walking our beautiful coastline. Bob can be reached at 805.720.5362 and/or [email protected]

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