Advertisements

Lost Insurance, Then Homes Burned

by Celia

In the wake of catastrophic wildfires that have ravaged California, many residents are grappling not only with the loss of their homes but with the added burden of inadequate or non-existent insurance coverage. Among the hardest hit is Chad Comey, a caregiver for his disabled parents, who lost their home in the Palisades condominium complex during last week’s Los Angeles wildfires.

Comey, who had initially delayed evacuation in hopes that the fire would be contained, was ultimately forced to flee with his mother in her wheelchair, relying on the help of a neighbor to navigate the five flights of stairs. Days later, he returned to find his home and neighborhood decimated, one of more than 12,000 structures lost to the flames.

Advertisements

“We were distraught. We all cried,” Comey said, as he and his family faced the grim reality of their situation. But the burden of recovery is made even heavier by the fact that they do not have insurance. His parents, who had long since paid off their mortgage, had opted out of insurance due to the prohibitive costs, which were already stretched thin by medical needs and living expenses.

Advertisements

Compounding the issue, the building they lived in had also been dropped by its insurance provider due to the high risk of fire. This scenario is becoming increasingly common across California, where millions of homeowners have seen their policies dropped in recent years as insurers reassess the growing threat posed by wildfires.

Carla Ramirez, a Los Angeles insurance agent, explained that major carriers have increasingly pulled out of high-risk areas like the Palisades and Malibu. “They stopped renewing what they thought was too risky,” Ramirez said, noting that the reclassification of these areas as fire-prone zones has made them uninsurable under traditional policies.

Shya Mousavipour, whose parents were similarly dropped from their insurance policy before their Malibu home was destroyed, noted the challenges that many homeowners now face. His family was forced to switch to the California FAIR Plan, the state’s insurer of last resort. However, these policies are often underinsured, providing insufficient coverage to rebuild homes or cover housing costs during the interim.

“The FAIR Plan doesn’t cover the cost of rebuilding,” Mousavipour said. “It’s a fraction of what they’ll need. My parents worked their whole lives for this home, and now it’s gone.”

The financial strain is not limited to those whose homes were destroyed. Jamie Lite, a resident of Acton, California, found out her insurance would be canceled just as her husband and son, both firefighters, were on the front lines battling the blaze. Lite said her premiums had skyrocketed from $1,750 to $7,000 a year before she was dropped, a price that is expected to increase further if she switches providers.

“I feel like I’m trapped,” she said. “You can’t sell your house, and who’s going to buy it without insurance?”

For many homeowners, this crisis is forcing difficult decisions. Celeste Vander Ham, who lives in Rancho Capistrano, and her husband, who relies on Social Security benefits, were dropped from their wildfire insurance following the 2018 Holy Fire. They now pay $10,000 annually for coverage through the FAIR Plan, and with just eight years remaining on their mortgage, they were forced to refinance, extending their loan for another 30 years.

“It’s heartbreaking,” Vander Ham said. “We’re being forced out of our own home because of the insurance costs.”

Insurance experts like Ramirez argue that rising premiums and insurers’ pullback from high-risk areas are a direct response to California’s increasing fire risks. “If your zone was historically not a high fire risk, but it’s becoming one, that’s the cost of living there,” she said, suggesting that residents in these areas may need to consider relocation if they can’t afford the new costs.

The state’s fire insurance landscape has shifted dramatically. Major carriers such as State Farm, Allstate, and Farmers have pulled back from the state or placed caps on the policies they will write. In 2022, Allstate stopped accepting new policies in California, and both Farmers and State Farm followed suit in 2023. In total, State Farm is expected to cancel around 72,000 policies in 2024.

While Allstate maintains that it continues to offer coverage for existing customers and has deployed resources to assist with claims following the fires, homeowners in fire-prone areas are often left facing shockingly high premiums with the FAIR Plan or non-admitted carriers, which can charge $20,000 to $30,000 annually.

Ramirez said that while these higher premiums reflect the true cost of living in fire-prone areas, many homeowners are simply unable to bear the burden. “People’s prices tripled, and they were told to increase their coverage, and most people were like, ‘No, we can’t afford that,’” she explained.

This gap in coverage has left many residents uninsured or underinsured, compounding the challenges of recovering from the devastation. As a result, many have turned to fundraising platforms like GoFundMe, with Comey’s family already receiving over $130,000 in donations.

“We’re grateful for the generosity, but it’s a sad state of affairs that people have to rely on GoFundMe to get back on their feet,” Comey said, reflecting the growing frustration with an insurance system that seems ill-prepared to handle the escalating risks of climate change.

Mousavipour argues that the answer is not for residents to leave high-risk areas but to implement fire prevention measures that would allow for better preparedness in the face of future fires. “We need a solution that ensures people are fully insured and incentivizes companies to stay,” he said. “It’s about addressing the issue, not just throwing people out.”

Advertisements

Comey, too, emphasized the need for a more humane approach, calling out the profit-driven motives of insurance companies. “These are people’s lives that have been lost, and everything they’ve come to know. Corporate profits shouldn’t come before people,” he said.

As California homeowners continue to struggle with the fallout from these fires, the broader conversation about the sustainability of the state’s insurance market and its ability to protect residents from the increasingly destructive impacts of wildfires has never been more urgent.

Related topics

Advertisements

You may also like

blank

Bedgut is a comprehensive insurance portal. The main columns include commercial insurance, auto insurance, health insurance, home insurance, travel insurance, other insurance, insurance knowledge, insurance news, etc.

[Contact us: [email protected]]

© 2023 Copyright  bedgut.com