Jane Dotson
As wildfire risk rises globally, the role of home insurance in mitigating losses from wildfires is becoming increasingly important. Unlike earthquakes, wildfires are considered insurable risks, and many homeowner policies cover wildfires. However, with escalating losses and increasing risks, insurance companies are becoming more reluctant to cover at-risk homes, especially in states like California, which has the highest number of homes at extreme risk of wildfire damage. This has led to rising property insurance premiums, stricter policies, and challenges in obtaining or renewing insurance coverage for homes in high-risk areas.
| Characteristics | Values |
|---|---|
| Insurability | Unlike earthquakes, wildfires are insurable as insurers are able to plan for wildfire risks. |
| Insurance companies | Some insurance companies are excluding wildfire coverage from home insurance due to escalating losses and increasing risks. |
| Coverage | Typical renters insurance includes wildfire protection, covering personal belongings from damage caused by smoke, flames, and water or chemicals used to fight the fire. |
| Premium | Property insurance premiums rose statewide from $86 million in 2014 to almost $134 million in 2022. |
| Risk assessment | Insurance companies are increasingly conducting inspections before renewing a policy or insuring a new home. |
| Risk mitigation | Insurers may require homeowners to clear dead plants, remove wooden furniture, and rebuild homes with safer materials. |
| High-risk areas | California is the number one state when it comes to homes at risk of wildfire damage. |
| Underinsurance | Many homeowners assume their coverage will fully cover rebuilding costs, but they may be underinsured. |
| Alternative options | If you are unable to get coverage due to living in a high-risk area, you may be able to find a FAIR plan, a state-mandated program that provides fair access to insurance for high-risk properties. |
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What You'll Learn
- Home insurance policies may cover wildfires, but not always
- Renters insurance typically includes wildfire protection
- Comprehensive coverage may cover vehicles in wildfires
- Wildfire insurance is becoming harder to find in high-risk areas
- Homeowners in high-risk areas can take steps to reduce wildfire risk
Home insurance policies may cover wildfires, but not always
Home insurance policies may cover wildfires, but this is becoming less common as insurance companies are increasingly reluctant to cover at-risk homes. In the past, home insurance policies typically included wildfire coverage. However, due to escalating losses and increasing risks, many insurance companies are now excluding wildfire coverage from their home insurance policies.
If you live in an area at risk for wildfires, your options for coverage may be limited. Many insurers do not offer home insurance in fire-prone areas or explicitly exclude coverage for wildfire damage. For example, in California, insurance companies have been leaving the market due to increasing wildfire risks, with some companies even cancelling existing policies. As a result, those who are able to obtain wildfire coverage in California are paying a premium for it.
If you are able to find a home insurance policy that covers wildfires, it is important to carefully review the details of the policy. Most policies will cover your dwelling and other structures on the property, such as a detached garage or shed. Some policies may also cover temporary living expenses if you are forced to evacuate your home due to a wildfire. However, it is important to watch out for coverage limits, exclusions, and high deductibles.
If you are unable to obtain coverage from a private company, you may be able to get insurance from your state's FAIR (Fair Access to Insurance Requirements) plan. These plans were created to give homeowners with high exposure to events beyond their control, such as wildfires, access to insurance when they cannot get protection under a standard home insurance policy. However, FAIR plans typically cost more than standard home insurance and may have lower policy limits, so it is recommended to explore all other options first.
To qualify for home insurance that covers wildfires, you may need to make certain repairs or improvements to your home to mitigate the risk of fire damage. Some insurance companies are now requiring inspections before they will renew a policy or insure a new home, particularly in areas considered to be at high risk for wildfires. After an inspection, the insurance company may require you to make certain repairs or improvements before they will provide coverage.
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Renters insurance typically includes wildfire protection
Wildfires are insurable, and renters insurance typically includes wildfire protection. However, this is becoming less common as insurance companies are increasingly reluctant to cover at-risk homes. In California, the number of homes that insurance companies declined to cover rose from 179,458 in 2018 to 235,250 in 2019.
Renters insurance covers your personal belongings from damage caused by smoke, flames, and water or chemicals used to fight the fire. It does not cover the dwelling itself, but your landlord's insurance policy should cover the structure. Some policies also cover temporary living expenses while the damaged property is repaired.
The coverage limits for renters insurance typically start at $10,000 but may range up to $100,000 or more. It's crucial to set policy limits that protect the value of your personal property. Liability coverage does not usually apply to wildfires since you are not liable for damage caused by a natural disaster. However, your renters liability coverage does cover you if you cause accidental fire damage, such as negligently setting your building on fire.
In places where wildfire risk is higher, you may find that standard renters insurance policies do not include wildfire coverage. Some policy providers in wildfire-prone areas refuse to offer fire protection altogether, while others provide wildfire insurance as additional coverage, which requires another deductible. It's important to carefully review your insurance policy to determine if your insurance carrier includes wildfire coverage.
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Comprehensive coverage may cover vehicles in wildfires
Wildfires pose a threat to all property in their path, including vehicles. If you live in a wildfire-prone area, it is important to understand whether your vehicle is protected.
Comprehensive car insurance covers wildfire damage, but it must be in place before an incident. Comprehensive coverage insures against non-collision damage, such as falling tree branches, fire, and animal strikes. While "fire" is generally covered by comprehensive insurance, it is worth double-checking to ensure your insurance company does not put any restrictions on wildfires based on your location.
If your vehicle is burned in a wildfire, your insurance company should pay you the market value of the vehicle at the time of the loss. However, if your vehicle is leased, you may need comprehensive coverage to satisfy your lease agreements. If you have a loan on your vehicle, comprehensive coverage is also necessary to protect the investment of the bank or financing company that technically owns your vehicle.
In California, insurance companies have been increasingly reluctant to cover at-risk homes, and many are excluding wildfire coverage from home insurance policies. However, the California Insurance Commissioner has issued a one-year moratorium on cancellations for affected ZIP codes.
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Wildfire insurance is becoming harder to find in high-risk areas
Wildfires are insurable, unlike earthquakes, as insurers can plan for wildfire risks. However, wildfire insurance is becoming increasingly difficult to find in high-risk areas. California is the top state for homes at risk of wildfire damage, with over 1,279,214 homes in extreme danger due to their location in fire danger zones. As wildfires become more frequent and severe, insurance companies are reluctant to cover at-risk homes. In 2018, they declined to insure 179,458 homes, and this number rose by 31% in 2019, with 235,250 homes losing coverage.
Insurance companies in California are exiting the market due to escalating wildfire risks, rising inflation, and high construction costs. In 2023, Allstate and State Farm ceased writing new policies, citing the need to manage risks and maintain financial strength. State Farm canceled 72,000 policies in California, and those who can obtain wildfire coverage must pay high premiums. Property insurance premiums in the state rose from $86 million in 2014 to nearly $134 million in 2022.
Homeowners in high-risk areas face challenges in finding affordable insurance. As wildfires become more common and year-round, insurance companies are denying renewals, canceling policies, or removing wildfire coverage. Some insurers are conducting detailed inspections and requiring repairs or improvements before providing coverage, which can be costly and exceed local building codes.
Additionally, mortgage companies typically require homes to be insured, so losing coverage can put financing at risk. Homeowners in fire-prone areas may struggle to find alternative insurers, and premiums in these areas are rising. As climate change increases wildfire danger, the availability and affordability of insurance in high-risk areas are likely to remain challenging.
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Homeowners in high-risk areas can take steps to reduce wildfire risk
Wildfires are insurable, and unlike earthquakes, insurers can plan for the risks. However, insurance companies have been increasingly reluctant to cover at-risk homes. Many are excluding wildfire coverage from home insurance due to escalating losses and increasing risks. Some insurers are conducting inspections before renewing a policy or insuring a new home, and they may require repairs or improvements before providing coverage.
Homeowners in high-risk areas can take several steps to reduce the risk of wildfires and increase the likelihood of their homes surviving a wildfire. Firstly, it is important to address the home ignition zone, which includes the structure and the area around it. The likelihood of the materials in and on your home igniting is known as structural ignitability. To reduce ignitability, you can install a Class-A fire-rated roof, such as asphalt shingles, concrete, brick, or masonry tiles. You can also replace wood fencing connected to your home with metal fencing, acting as a candle wick leading fire to your home otherwise. Additionally, installing ember- and fire-resistant vents can help keep wind-blown embers out of your house. Having non-combustible materials for at least 6 inches at the bottom of exterior walls can stop embers from accumulating and igniting your walls. Enclosed eaves with non-combustible or ignition-resistant materials can prevent heat and embers from getting trapped and igniting. Finally, upgrading to multi-paned windows is more resistant to breaking during a wildfire, helping keep flames from entering.
Creating defensible space around your home is crucial in reducing the risk of wildfires. California law allows insurers to require a "defensible space" of at least 100 feet around your home, which may be extended if a fire expert deems it necessary to reduce the risk of flame transmission. Establishing this space involves creating management zones around your property, including detached garages, storage buildings, and other structures. Zone 1, the area nearest the home (0-5 feet), requires vigilant work to reduce wildfire hazards, such as removing vegetation and combustible materials. Zone 2 (5-30 feet from the home) is where fuels should be reduced, and the use of limited wildfire-resistant plants is recommended.
Additionally, installing smoke alarms on every level of your home, particularly in bedrooms and outside sleeping areas, is important for early detection. Testing alarms monthly and replacing batteries as needed is essential. Storing combustible and flammable liquids away from ignition sources is another preventive measure. Using hard landscaping options like gravel, pavers, or concrete within the five-foot zone around your home can also help reduce fire risk. Finally, covering all vent openings with a 1/16 or 1/8 inch metal mesh prevents flying embers from entering and igniting fires.
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Frequently asked questions
Yes, unlike earthquakes, insurers are able to plan for wildfire risks. However, with wildfire risk rising globally, insurance companies have been increasingly reluctant to cover at-risk homes.
Check your insurance policy documents, which spell out coverage from specific perils. Most cover your dwelling, other structures on the property, and improvements such as fences and landscaping.
If your homeowner's policy doesn't include wildfire insurance, check with them to see if you can obtain it. If you're unable to get coverage due to living in a high-risk area, you may be able to find a FAIR plan, a state-mandated program that provides fair access to insurance for high-risk properties.
Factors such as the distance from wildfire zones and fire departments will determine whether properties remain insurable and at what cost.
By law, insurance companies have to give you 45 days' notice. During this time, you may be able to get them to reverse their decision or find a replacement policy. You can also appeal the decision or buy coverage from a non-admitted carrier, although this may be significantly more expensive.
