Heidi Lange was among the first to recover after the deadliest wildfire in California history destroyed her home in 2018 along with much of the town of Paradise.
After the fire, she divorced, leaving her with only half of the insurance payout. But she budgeted, planned ahead and even paid extra for plaster siding and a metal roof to make her new house more fireproof. He thought the hard part was over. So the office manager was stunned to learn this month that after nearly four years of living in the same home, her annual home insurance premium will rise dramatically, from $1,200 to $9,750.
“To see us come this far only to have our legs kicked out from under us,” she said. “This is so crazy to me. How is that the biggest thing we face?’
Skyrocketing home insurance prices have engulfed the town of Paradise, residents and officials say, as it prepares to mark the fifth anniversary of the Camp Fire on Nov. 8, 2018. Residents have been hit with annual premiums that are close to or exceed $10,000, leaving many to are wondering how to rebuild their hard-hit community when insurance is so shockingly high for houses in an area that is supposed to be among the most affordable in California.
Seven insurers are leaving the state
The wildfire that tore through Paradise and surrounding areas, killing 85, has raised concerns among the nation’s home insurers about the costs of wildfires fueled by climate change. Seven of California’s top 12 home insurers — including Farmers Insurance, State Farm, Allstate — have suspended or limited new business in California, saying they can’t afford to take on new customers.
California Insurance Commissioner Ricardo Lara is trying to step in to reform the system and make the private market stronger, but most of the changes won’t go into effect for at least another year.
Neither the state insurance department nor a major industry lobbying group could explain the sharp price increase five years after the fire, when so many steps had been taken to protect the community against future wildfires, including initiatives to bury power lines and clear brush and trees from buildings. The state did not have data on the average premium increase for the city.
Michael Soler, a spokesman for the insurance department, said premiums depend on a number of factors, including the cost of reimbursement, increased coverage or reduced deductibles, and state-approved rate increases. He said private insurers should be able to offer rebates for community firefighting efforts sometime early next year, but the risk of wildfire still exists in Paradise.
Farmers Insurance was named by several residents as the company that raised its premiums, but residents also said they could not find other insurers offering more affordable policies. The farmers declined an interview request.
“Homeowners insurance rates are determined using a number of different variables, including historical loss data, loss trends, age and construction type of structures, etc. These and other factors, combined with inflation adjustments, are reflected in customer rates,” the company said in a statement.
Rex Frazier, president of the Personal Insurance Federation of California, said insurers lost more than two decades of profits from the 2017 and 2018 wildfires, and people may have to pay more to live in wild areas.
Carl Jonsen, a retired drywall builder, has lived in the same house since 1979, when he moved to Paradise. He survived the 2018 fire, but his previous insurer turned him down and he received a new offer of more than $14,000, which he was unwilling to pay, he said.
Johnson doesn’t feel good about being without fire and liability coverage, but he doesn’t think he has much of a choice.
“I guess I’d rather do that and have a place to live unless it burns down,” he said of the insurance waiver. “I need to have money to buy food…and pay taxes.”
Gene Robinson, 61, and his wife bought a new home in Paradise with insurance proceeds from the house that burned in the Camp Fire. This year, the insurance premium offered by Farmers for their four-bedroom, three-bathroom home jumped from $2,800 to $9,550.
Increase in applications for state FAIR insurance
The couple opted for basic fire coverage through the California insurer of last resort, which quickly became the only option left for the people of Paradise. The Robinsons pay $4,500 through the California Fair Access to Insurance Claims Plan and $750 with another insurer for additional liability coverage.
“It’s a beautiful home, but it really makes you think about staying in the state,” said Robinson, a retiree.
The FAIR plan averages 1,000 new applications per weekday from homeowners who cannot find affordable home insurance on the private market. As of September, it had written more than 330,000 policies — up from nearly 273,000 plans last year and 127,000 in 2018.
Lara, the insurance commissioner, wants to allow insurance companies to take climate change into account when setting their rates, but only if they write more policies for households who live in areas at risk of wildfires.
The state is also trying to allow insurers to provide discounts to homeowners who take certain measures, such as installing roofs that are fire-resistant and upgrading to multi-pane windows, said Soler, the department spokesman.
He said home insurance premiums in California increased about 35% on average between 2017 and 2022, driven by historic wildfire losses, but were still lower than other large states with high climate risks. including Louisiana, Texas and Florida.
Cathy Earhart, a Chicago judge who focuses on the insurance industry, applauded California’s efforts to persuade insurance companies to stay in the state because that should ultimately promote competition and stability.
“Unfortunately for the homeowner today who is paying their bill,” she says, “it takes a while.”
Lange, a lifelong area resident, is frustrated that elected officials and insurance companies can’t come up with a solution. She may have to go across the state to insure her home, though it will cost $7,300.
She considered leaving Paradise after the fire.
“But here are my friends and my family, my church and my work – there is my village,” she said, breaking down in tears. “And I just wasn’t going to let that be taken away from me.”
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