How fire insurance works and what the future looks like after Caldor


SOUTH LAKE TAHOE, Calif .– The insurance landscape in California continues to evolve as devastating wildfires like Caldor and Tamarack become the rule rather than the exception.

The new prevalence of large fires only increases liability, leading to higher premiums and, for some carriers, an outright refusal to cover damage caused by the fire. Insurance options still exist, but the issue is, and will continue to be, price adequacy.

“California is going to be tough for a while,” said Christy Lyons of insurance agency Fromarc. “Many, many carriers will no longer write in forest fires. They don’t want this risk.

She added that carriers still offering fire coverage have premiums so high that customers take deductibles in the order of $ 2,500.

With fewer and fewer options, more and more homeowners are forced to turn to the California FAIR Plan, a self-proclaimed “last resort” insurance policy for fire coverage created by the state in the 1960s. It guarantees access to some form of coverage for all homeowners in California, but at a price, Lyon said, could be double or triple what an insured paid whose insurance abandoned fire coverage.

FAIR also only covers fire, lightning, internal explosions and smoke with additional coverage for vandalism or malicious mischief and events ranging from windstorm, hail, even volcanic eruptions which all increase the premium. It doesn’t offer traditional home insurance, forcing customers to look for an additional plan with its own premium.

According to Lyons, Nevada does not have a government safety net plan. Unauthorized carriers, or insurers not licensed by the state, cover fires but also face the problem of pricing.

So, after navigating the labyrinth of expensive and unavailable policies, what do policyholders gain?

What the insurance covers

In addition to typical damage reimbursement, some insurance policies include coverage for loss of use and additional living expenses, which can help displaced policyholders pay for temporary living expenses, food costs, storage and more. even furniture rentals, according to an Aug. 18 press release from California. Insurance Department Commissioner Ricardo Lara.

“Forest fires are devastating both to homes and people’s lives, even if you don’t suffer property damage,” Lara said in the statement. “Residents who have been evacuated should contact their insurance agent or insurance company to find out what their tenants ‘or owners’ policy covers and other resources that may be available to them while mandatory evacuation orders are being issued. are in place. “

Some policies also include a civil authority clause, which replaces loss of income if a government orders the evacuation of a business due to a natural disaster. Lyons said reimbursement varies by carrier and some require a deductible payment.

Last year’s Senate Bill 872 instituted a requirement that homeowners’ insurance policies that cover wildfires provide at least two weeks of additional coverage for living expenses with extensions for good. cause, regardless of the material damage.

Lyons recommended that insurance clients keep inventory of their property before a fire, through video recordings, receipts, etc., and keep their agent informed of new projects, such as renovations. SB 872 implemented groupings for inventory reporting so that property owners can group items like clothing, food, and books into categories, streamlining the process.

Lyons added that customers need to know what their policies cover before incidents like the Caldor fire occur.

“Out of sight, out of mind,” Lyons said. “A lot of people don’t want to know about their insurance. They just pay for it. I would just encourage people to talk to their agents.

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