Insurance companies are pulling out of property insurance in locations that are showing signs of high claims/costs. In some areas of California, there is rising concern among property owners regarding homeowner’s or rental property insurance now that two of the largest property insurance companies (State Farm and Allstate) announced that they are going to stop selling new policies and are canceling existing policies in disaster-prone areas.
To be fair, insurance companies are facing severe and growing challenges from the unpredictability, frequency, and severity of Climate Change. In addition, in many areas, they are also contending with the very high cost of construction.
What should you do if you suspect an insurance policy cancelation?
- Read your mail since insurance carriers are required to follow rules that benefit the consumer before they can cancel a policy. They may provide tools or alternatives, but they usually have a deadline.
- Make preventative repairs/upgrades and document them for your insurer.
- At the next opportunity consider increasing your deductible since you don’t want to make any small claims.
What should you do if your coverage is denied or dropped?
- Read carefully and follow instructions in their correspondence.
- You should first look for Admitted Carriers (e.g. State Farm, Allstate, AAA, USAA, Farmers) to obtain new coverage because they are regulated by the Department of Insurance (DOI) which controls costs and enforces regulations.
- If there is no Admitted Carrier willing to cover your property, then look for Non-Admitted Carriers. These are less regulated, more costly but can provide essential property insurance. https://www.insurance.ca.gov/01-consumers/120-company/07-lasli/
- If neither of these options are available for your property in California, you can pursue a policy under the California FAIR Plan which offers basic fire protection without liability or theft coverage. It will cost more than the traditional policy. In addition, you should consider a supplementary policy to cover what is excluded in the FAIR plan. Let us know if you are in other states so we can let you know of an equivalent resource.
Edi Alvarez, CFP®
BS, BEd, MS