Since the Thomas Fire and debris flow in 2017-18, the topic of homeowners insurance in the Santa Barbara/Montecito area has been a very big issue for people who want to obtain adequate insurance for their home.
“Is my home in a high fire risk area” and/or “Can I get insurance for a new home I’m interested in” are just a few of the many questions potential homeowners ask. in the area.
There’s no easy answer, but there are some helpful ideas that can make the process a little less daunting.
The first thing a prospective homeowner should do is contact their trusted local Realtor whenever they identify a home they are interested in. This is because the Realtor may contact local insurance carriers to determine the type and cost of insurance that may be available, based on the home’s location and other relevant information.
The last thing a buyer wants to find out after falling in love with a property is that insurance will cost them $30,000 or more per year. Better to find this out sooner than later.
This is important not only for houses in the local foothills and mountains, but also in the city. People are surprised when a house they are interested in is at a high fire risk even though it doesn’t seem like it would be dangerous. Houses on the road can vary in type and price, depending on various factors such as slope, vegetation, etc.
That’s why regardless of the home’s location in our area, learning the price and type of insurance should be the first thing to do after determining interest in a home.
The next step is for the insurance carrier to determine what type of policy is right for the home.
Homeowners insurance is guaranteed by law in California, regardless of the location of the home, etc. However, the cost of insurance and available coverage can vary widely.
There are three basic types of insurance companies in California.
The first is through an “accepted” company. These are companies such as State Farm, Farmers, etc., which are known to most people. These companies are highly regulated by the state of California and are mandated as to what they can and cannot pay in relation to a particular policy.
These companies also adhere to certain standards and are constantly evaluated for their ability to pay potential claims. Many lenders will require insurance to meet minimum appraisal standards, and working with an accepted company can ensure those standards are met.
The ratings of each company are public, so they can be easily searched by the consumer. California rules that they must attempt to obtain coverage from three accepted carriers before they are able to obtain coverage from any of the following carriers.
Sometimes, when an accepted carrier is unable to take a risk due to fire risk, you may need to look at insurance with the California FAIR Plan. The California FAIR Plan was created as “Fire Only” insurance intended specifically for homes that accepted insurers will not take. It was created as a stopgap to ensure that all homes in the state could obtain fire insurance.
It is important to note that the California FAIR Plan is not a complete package on its own, it must be combined with a Difference in Condition (DIC) or companion policy to cover other losses that homeowners may face.
Finally, you may find that the above two are not always viable options in certain homes. When this happens, you can often get coverage by working with a “non-admitted” or “Surplus Lines” company. These companies often specialize in certain types of unusual risks that are considered undesirable by most insurers.
Non-accredited companies are not regulated by the state and should be considered as a last resort. Before a repudiated company will consider taking out a policy, it must obtain a signed form certifying that the home has been repudiated by three or more accepted carriers.
Non-admitted insurers are not regulated by the Department of Insurance as admitted insurers, so they can often be more expensive, they can also be pulled by the state at any time, refusing to renew based on their risk tolerance levels .
Is this too much information? Absolutely! That’s why you need to find a trusted insurance agent who can help guide you through the insurance process, find creative solutions when needed, and support you, your trusted realtor. local and your lender during your home buying process.
Bob Walmsith Jr. is the 2022 president of the Santa Barbara Association of Realtors (SBAOR). He is a licensed California real estate agent with Berkshire Hathaway HomeServices California Properties here in Santa Barbara. He has served and chaired several committees within SBAOR and has served on its board of directors for the past five years. Bob can be reached at 805.720.5362 and [email protected]