Siskiyou homeowners face loss of homeowner's insurance due to fire risk

In addition to drought and wildfire, some California residents are facing a new peril: loss of their homeowner’s insurance.

Most of the terminations are in rural areas with heightened fire risk, according to industry data. Finding replacement coverage can be challenging with some policies from state-run programs costing $10,000 or more.

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Raven Stevens, a former firefighter with the California Department of Forestry, said she received a letter from her insurance company stating that she needed to cut down 18 of the 22 trees on her property in Mount Shasta.

“I could read the handwriting on the wall,” she said. Although Stevens was able to quickly find a new policy, her brother and niece who live in Grass Valley were not so lucky. Their insurance more than doubled. Her advice to homeowners: “Be proactive.”

Brokers scramble to help homeowners secure insurance

None of this should come as a surprise. Losses from a record wildfire season last year when more than 4.25 million acres of the state burned – an area larger than Connecticut – were in the billions of dollars. 

Many insurance agents are scrambling to help their clients find replacement coverage.

“At first some of these companies were just sending out wildfire mitigation stuff to try and lessen the risk of a home burning down but now we are just seeing straight non-renewals,” said Sean Harker, a broker with the Rich Toreson Insurance Agency.

Harker said in the past week alone he received 20 non-renewal orders for homeowner’s policies in Siskiyou County, many from major carriers such as Nationwide.

“All of these insurance companies have their own wildfire maps – topography maps that show slopes and wind patterns,” he said. “They plug in the address, they see where it falls on their map, and there are certain areas where it is just going to be a hard no.”

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In addition to non-renewals or fire risk surcharges being added to a homeowner’s policy, comprehensive rates for automobiles are also increasing in fire-prone areas. Hundreds of cars are destroyed in wildfires every year. Some are vintage collections stored in a garage.

Difficulty in securing homeowners insurance are affecting home sales

There are other ripple effects.

Rick Knight, a real estate agent with Century 21 Advantage, said he has had only one sale yanked from escrow at the last second due to insurance issues. Now, instead of insurance being simply line item in home sale paperwork, it is one of the first things he discusses with buyers.

“It is going to get worse,” he said. “The only people who are interested in the insurance industry are people who are interested in making a good return. If they can’t make a good return guess what?”

Knight said real estate agents are required to disclose if a property is in an area where homeowner’s insurance can be problematic, either because of non-renewals or other homebuyers experiencing difficulty in obtaining coverage.

The problem, just like climate change, does not appear to be going away. 

“It’s part of the poker game. It is more expensive,” Knight said. “You screw up the planet and now it costs more.”

Homeowners insurance cancelations are up in California

In 2019 alone, nearly a quarter of a million policies were canceled in California, a 31% increase from the previous year, according to the state Department of Insurance. In zip codes with moderate to high fire risk non-renewals jumped by 61%. And that was before the catastrophic 2020 fire season.

In a blunt assessment of the future, state insurance analysts in a draft report write that “communities are likely to enter a damaging feedback loop where escalating risks lead to increased losses, then financial backsliding, fewer insurance options, and diminished capacity for future resilience.”

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As a last resort, the state offers its own coverage through the California FAIR Plan. The insurance is often costly and comes with fewer benefits such as liability protection or damage from other unforeseen events such as broken water pipes. That requires homeowners to purchase a second, supplemental policy, thereby increasing the total overall cost.

In addition, a one-year moratorium on non-renewals during the COVID-19 crisis expired late last year, possibly fueling the recent surge, brokers said. One change that still exists requires insurers to provide 75 days advance notice of a pending non-renewal, up from 45 days in previous years.