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As wildfires become more common, more and more Americans are struggling to find homeowners insurance or being dropped by their insurance carriers. Over 4.5 million U.S. homes in 38 states are at high or extreme risk of wildfire, the Insurance Information Institute reports. In a 2021 survey by the National Association of Insurance Commissioners (NAIC), two-thirds of homeowners say their insurance premiums have risen in the past three years and that wildfires are making it harder to renew their insurance.
How can you get homeowners insurance if your home is in a fire zone?
What Homeowners Insurance Does and Doesn't Cover
Homeowners insurance differs from other types of insurance homeowners may carry, such as mortgage insurance or home warranty insurance, neither of which provide coverage in the event of a fire. Most standard homeowners insurance policies provide four types of coverage:
- Liability protection covers legal fees and medical costs if someone is injured in your home.
- Dwelling coverage pays to repair or rebuild your home's structure if it's damaged or destroyed by fire or smoke (including from wildfires), wind, hail, lightning, vandalism or theft. It may also cover unattached structures on your property, such as a garage or gazebo.
- Personal property coverage pays to replace or repair belongings that are damaged or stolen from your home (and sometimes outside the home, such as from your car).
- Additional living expenses (ALE) coverage, also called loss of use coverage, pays the cost of living elsewhere while your home is repaired or rebuilt.
Homeowners insurance typically doesn't cover damage from floods, earthquakes, sinkholes, or from a sewer, sump pump, septic tank or drain backing up. You'll need separate insurance for these risks.
How Does Fire Risk Affect Homeowners Insurance Costs?
Many factors affect your homeowners insurance premiums. A risky location, such as a high-crime area or one prone to wildfires, is one. Your home's age, construction, materials and adherence to building codes also influence the cost of insurance. In some states, insurers consider your credit-based insurance score, which estimates the likelihood you'll file an insurance claim. Your deductible and amount of coverage also affect your premiums.
Insurers use multiple sources to assess fire risk, and don't share their methodology with consumers. You probably already know if your home is in a fire zone; if you're not sure, your city or state may have resources you can use to find out. For example, in California, you can use the CalFire website to check fire risk.
That still won't answer the question of whether, or how, lowering your fire risk can reduce your premiums. Many homeowners "harden" their homes against fire, often at considerable expense, only to discover that the changes don't affect their insurance premiums. Just eight insurance companies discount premiums for policyholders who take steps to reduce fire risk, according to United Policyholders, a nonprofit organization that provides insurance resources for consumers. In California, the insurance commissioner has proposed regulations that would require insurers to share wildfire risk scores with homeowners and give them time to make changes that could reduce their scores.
What to Do if Your Insurance Carrier Drops You
If you live in a fire zone and your homeowners insurance company won't renew your premium, contact your state department of insurance to ensure they're following state laws. In California, for example, insurance companies must notify homeowners of cancellation or nonrenewal at least 75 days before their policy expires. For the past few years, California has also set moratoriums preventing insurers from canceling insurance for homeowners in high fire risk areas.
If the cancellation is lawful, ask your carrier about any changes you could make to get insured again. Meanwhile, shop around for new insurance. Ask neighbors for recommendations or contact an independent insurance agent who works with multiple insurance companies.
How to Get Homeowners Insurance in a Fire Risk Zone
If you can't get homeowners insurance through a standard insurance carrier, you have other options.
- Fair Access to Insurance Requirements (FAIR) Plans: FAIR Plans, available in every state, provide bare-bones coverage for people who, through no fault of their own, can't otherwise get homeowners insurance. All FAIR Plans cover fire, vandalism, riot and windstorms. However, most do not include liability or medical payments coverage, and some exclude ALE and personal property coverage caused by wildfire. To fill these gaps, supplement a FAIR Plan with a Difference in Coverage (DIC) plan. Keep shopping for new insurance every four to six months; FAIR Plans are meant to provide temporary coverage.
- Surplus or excess lines carriers: Surplus or excess lines insurance carriers, also called non-admitted carriers, are specialized companies that cover risks standard (admitted) insurance companies won't. Homeowners insurance from these carriers is generally more expensive and more limited than that from a standard carrier. Although surplus lines carriers are regulated, states don't guarantee payment of claims should the carrier go bankrupt, as they do with admitted insurance carriers. Before purchasing a surplus lines policy, check the company's financial solvency.
- Premier carriers: Carriers including Chubb, AIG and PURE insure high-risk, high-value properties, often providing fire prevention and private firefighting services. Your home may need to exceed a certain value to qualify.
Not all homeowners insurance agents are familiar with the options above; contact your state's department of insurance for information.
Protect Your Home With Insurance
Getting homeowners insurance in a fire risk zone is costly—but going without is risky. If your mortgaged home burns down, you'll still have to pay the mortgage or face foreclosure, which can severely damage your credit. Even if your home is paid off, any losses will come out of your pocket.
While seeking homeowners insurance, take these steps:
- Build up your emergency fund. It can help with costs your insurance may not cover, such as bringing your home up to code or living in a hotel while rebuilding.
- Harden your home against fire. Removing combustible items from within 30 feet of structures, trimming trees and plants, and removing debris from your roof and gutters are easy ways to protect your home. The Insurance Institute for Business and Home Safety offers additional tips.
- Consider moving. Homeowners insurance in a fire zone adds significantly to the cost of homeownership. Since homeowners insurance costs in fire zones are likely to keep rising, selling your home may be the best way to save money and gain peace of mind.