Where there’s smoke, there’s no fire insurance
Graeagle’s fire hall was packed with close to 200 community members on the evening of Sept. 20. Everyone had one thing in mind: How to make sense of the recent spate of refusals and non-renewals by their home insurance companies, triggered by recent wildfires. Many looked worriedly at the cancellation or non-renewal notices they brought with them; many were angry.
Chuck Bowman, the Graeagle Firewise Community coordinator, welcomed Ted Dobbs, a commercial and personal insurance underwriter for 40 years. He’d given this same talk two years prior to an audience of 50, he said, but recent, devastating California fires had insurers bailing out of the market where, as Dobbs put it, “people are living near trees.”
Dobbs comes from the “company side,” and he gave the perspective of someone who made assessing risk a career. He wanted to help people understand what they were up against, and why.
Insurers were kept from raising their rates by the Dept. of Insurance. Insurers couldn’t continue, at present rates, to insure entire areas which, as the fire in Paradise proved, could go up in flames.
In the meantime, getting out of the business was the safest way for insurers to avoid the possibility of tremendous losses. They were taking entire zip codes out of their portfolio. “Insurance company methodology,” said Dobbs, “is by zip code.”
“Isn’t this redlining?” asked one member of the audience. Dobbs stopped for a moment before he said, essentially, yes.
Redlining, historically used to target minority neighborhoods, draws a red line around an entire area and says the risk to do business there is too high. This, if true, is a frightening prospect for homeowners.
Dobbs had several concrete suggestions for the somewhat unruly crowd. First, if you get a renewal notice, even if the rate has gone up significantly, “pay it.” Most companies will non-renew and only cancel if the homeowner doesn’t pay. And, his point was, a high premium meant you still had insurance — you were one of the lucky ones.
Second, stay with a company for the long haul if you can. Insurers are more likely to keep long-term clients. Third, talk to your auto insurance carrier. If you have a good relationship with them, they might write you a homeowner’s policy.
Finally, do all of the things the Firewise Community tells you to do: “Create a defensible space around residential structures by thinning trees and brush; choosing fire-resistant plants; selecting ignition-resistant building materials; positioning structures away from slopes; and working with firefighters to develop emergency plans.”
Here’s the catch, however. Dobbs gave his personal example. He has a cabin in Calavaras County, an area that has had disastrous fires in the past 10 years. He’s created defensible space and done everything else to make the cabin fire resistant. After his insurance was cancelled, he called 14 or 15 different agents. Most came back within a day and said, “Bad zip code.”
His conclusion — none of the things he could do to prove his home was fire safe mattered. He ended up getting the Fair Plan. And, in the end, that’s what he recommended for most of the people in the room. In addition, since the California Fair Plan only covered his fire insurance, Dobbs said homeowners will need a wraparound plan, typically fairly cheap, to cover the rest of their home insurance and liability needs.
The California Fair Plan website is cfpnet.com. It outlines the steps those searching for insurance will need to take in order to get Fair Plan coverage. This is a plan of last resort. You have to demonstrate that you have tried hard to get home insurance through a regular agent or broker first.
The Fair Plan website also strongly recommends you go through a broker to get the plan, because it’s not a simple process. A broker can help you: submit an application online and, in most cases,obtain an instant quotation; assist in determining adequate coverage amounts; assist in obtaining the other types of coverages you may need; assist in making any changes to your policy; and assist in reporting a claim to the company.
In addition, you can find a local agent or broker on the website. You need to request replacement value coverage, otherwise, you’ll only get cash value, which is much lower according to Dobbs. He said that 80 percent of homeowners are underinsured. He added that it’s important to take photos of your house inside and out to prove replacement value. “If there’s any message that I can give you — insure your house to proper value,” said Dobbs. “The only person who knows about your house is you. They don’t know anything about Plumas County.” Also, take photos of belongings, he said.
Dobbs said his new combined Fair Plan and wraparound insurance has doubled his insurance rate. But, at least he has insurance, he said.
