Now What? and other Questions about Home Insurance in the State.

Finally consumers are taking note of the property insurance situation that we are all in now in the state of California. With the recent announcement that State Farm is no longer taking on new property insurancepolicies in the state, CNN, AP, SF Gate are just now seeming to report on this growing problem.

In our opinion - this is NOT a new problem. But has been growing worse and worse during the past two years. Allstate recently was in the news about how they are no longer writing home insurance policies. This was not so much recent news as old recycled news. However the point remains the same - An Increasing Quantity of Property Insurers in California are no longer Writing new Home Insurance Policies.

But all of those headlines about what is happening and what the State may or may do about it - does not help clients at the present moment. What does help them is a simple explanation of how to secure property insurance RIGHT now.

In general the type of home insurance policy you want is a Preferred Insurer: State Farm, Chubb, Nationwide, Safeco, Farmers, AAA, USAA, Hippo, etc. However - many of these insurers are no longer taking on new properties. That being said you should double check yourself. [One side note here - unless there is an underwriting reason to leave a preferred insurer right now, you would NOT want to voluntarily move from a Preferred Insurer to one of these other options.]

The next batch of considerations are in two buckets and they are at about the same level, but each has its pluses and minuses. These two options are: 1. Nonadmitted [also called surplus lines] Policies and 2. FAIR + DIC Policies. We will briefly go through these:

1. Nonadmitted Insurance is simply insurance that is not ruled and regulated by the California Department of Insurance. It is also not backed by the State Guarantee Fund and is typically a full pay policy. These homeowner policies, HO3, etc - have a look and feel of a regular home insurance policy - but often with more limitations and the coverage is often not [but not always] as broad. One famous nonadmitted carrier is Lloyds of London.

2. The insurer of last resort is the California FAIR plan. It was created by the state to take the properties that no insurer wanted. Now it is a plan that is increasingly being used. The FAIR plan is a partial coverage planand does not cover all of the perils that a homeowners policy does. To do that you would purchase a second insurance policy called a DIC policy. Two Policies, Two Premiums, One general line of protection.

In general these are the two common directions that most consumers will go to when unable to secure insurance through a preferred admitted insurer.

A couple of notes here - it is a LOT more complicated that these two paragraphs. Please speak with a licensed broker or agent whenever making coverage decisions. Do not make decisions based solely on this post. I have grouped these - but these groups are not a 100% cut and dry categorization.

As to Why you should choose a nonadmitted insurer over the FAIR plan or vice versa - this is absolutely where a good broker agent comes into play. Its too complicated to go into it in this post. But in general it depends on your situation, your goals, and the insurance marketplace at the time you apply. Considerations such as coverages, premiums, access, speed to placement - are all important.

So Now What? You are purchasing a new home or perhaps you were nonrenewed by your current home insurer in California. What do you do? Do you call all sorts of agents and brokers, do you go online and fill out forms, where do you go? First off, it certainly makes sense to explore the admitted options such as AAA, USAA, etc first.

Second, if you receive all declines from them - its time to reach out and deal with one broker. Why just one? Frankly many of us have access to very similar markets. Once you are in this camp it can be helpful to Shop the Broker. Some brokers have more experience with this stuff and others not so much. Choose wisely though. That broker can review FAIR/DIC and nonadmitted options for you though. The process to procure these quotes though is far more complicated than typical admitted policies.

Lastly - One common quesion we get all of the time is - When will the market go back to normal. The short answer is - No One and I mean no one knows this answer. My guess is that it may take a while to sort it out.

Scott W Johnson is the Owner and Broker Agent at Marindependent Insurance Services LLC, based out of Mill Valley California. 0H11625. 415-294-5454