In this article, we will delve into the critical considerations for Bay Area home buyers, covering aspects such as the impact of property systems, location, surroundings on insurance costs, and how our team at Atlasa can be a useful resource for you. We aim to equip you with the knowledge needed to navigate the complex insurance terrain effectively. By strategically purchasing the right house and crafting a well-rounded insurance plan, you can protect your investment against unexpected eventualities while avoiding excessively pricey premiums.
What to Know About Policies for Homeowners Insurance Coverage in the State of California
The California insurance landscape is evolving rapidly, driven by the increased frequency and severity of climate-related disasters. Governor Gavin Newsom and California’s Insurance Commissioner, Ricardo Lora, have acknowledged the need for significant changes to regulate the state’s home insurance market. These changes are aimed at making insurance more available to California residents in both high and low risk areas, although it will likely come at a higher cost.
One of the key developments is that insurance companies will be required to insure residents even in very high-risk areas, but in exchange, the Insurance Commissioner will allow companies to use catastrophe modeling to factor in current or future risks when setting policy prices, which was not previously allowed in the state of California. While this provides more flexibility, it also means that homeowners in high-risk areas may face significantly higher premiums. The government’s goal is to prevent insurance companies from leaving California, ensuring homeowners have more options for coverage, even if fair rates are not guaranteed.
A new study shows that over 39 million Americans could soon face skyrocketing insurance premiums, with some interviewed homeowners in the Bay Area claiming that their premiums have already doubled since last year.
Consumer Advocate Harvey Rosenfeld believes that insurance companies are using climate change as a reason to alter policy rules that have historically saved Californians hundreds of billions of dollars over the past 35 years. This change in the insurance landscape is not unique to California, as some insurers have already exited hurricane and flood-prone states like Florida and Louisiana.
Napa State Senator Bill Dodd on the other hand, thinks the insurance market is not healthy or balanced. He represents wildfire prone wine country, and is glad the new rules will require insurers to get back into high wildfire zones. Dodd cites the increased insurance rates he has seen for nowhere near wildfire areas, who are unable to get renewed. He hopes these upcoming policy changes could solve for that.
Impact on Bay Area Home Buyers
For Bay Area home buyers, these changes in the insurance industry have significant implications. Jeff Kwan, an insurance agent representing companies like Allstate, Farmers, and State Farm, has noted that rate increases of 20-30% on average are likely, with some homes facing a staggering 200% increase. This could render many homes uninsurable and unsaleable, which makes selecting the right real estate asset to invest in even more crucial now than ever.
The prospect of paying hundreds, if not thousands, of dollars more every year for home insurance is a daunting one for prospective buyers. Additionally, the hopes of establishing a public insurance company may alleviate some of these concerns, but it remains a complex process.
While these changes are expected to go into effect by December 2024, they underscore the need for Bay Area home buyers to be proactive in securing their homes against future insurance uncertainties.
Choosing Your Sanctuary Wisely
So, what can Bay Area home buyers do to secure their sanctuary in the face of these insurance challenges?
We spoke with Neda Gilani-Byrd, a thorough, reputed and licensed insurance agent at Alive Insurance in the Bay Area, to provide you with specific recommendations on how you can secure the best policy for your home. We’ve consolidated those recommendations below.
- Consult a Real Estate Expert and Do Your Research: At Atlasa, we aim to serve as a consultative resource to help you determine next steps and make key decisions about your home purchase. We’ll begin by providing data-driven insights about the specific location you are looking to purchase in. Are there historical records of wildfires or other natural disasters? What is the proximity to fire or flood prone areas? What are the hidden costs associated with this location? This information will help you better assess the insurance risk.
- Ensure Your Home is Updated: Make sure the roof, electrical, heat and plumbing are updated. These are key components to ensuring that your insurance policy will be affordable, roof being most important. Insurance companies usually want a roof that is ideally 20 years old or less, otherwise it’s unlikely that the home will qualify for insurance coverage. Some insurance companies will prevent renewals due to the condition of the roof.
- Engage with Insurance Experts While Shopping for a Home: Reach out to 2-3 different insurance agents who specialize in the Bay Area market. They can provide insights into the specific risks associated with your desired location and recommend appropriate insurance coverage.
- Check for Exclusions: Many insurance agents will exclude parts of coverage that lenders won’t approve of. Make sure there are no exclusions when you’re getting a quote from an agent to ensure the plan will cover you appropriately and be acceptable for a lender.
- Get Insurance Quotes Before You Write Offers: Make sure to get multiple insurance quotes before putting an offer on the home you are interested in, to avoid surprise costs or uninsurability during escrow.
- Package Home and Auto Insurance: Some companies won’t write standalone home insurance policies, so it can be a good idea to package home and auto together. This is also a great way to save money.
- Make Sure Your Insurance Agent is Knowledgeable: Before purchasing a policy, work with an agent who is reputable, knowledgeable, asks questions and takes the time to provide you with a solid plan and coverage. Using an educated insurance agent is important, and prevents you from buying a policy that won’t cover your home’s specific needs.
- Contingencies: With the changing policies and increasing costs around home insurance, consider putting in insurance contingencies in on your offer to purchase a home to make sure valid home insurance can be acquired.
- Stay Informed: Keep an eye on regulatory changes and updates from the California Insurance Commissioner’s office. Being informed about evolving policies and their impact on insurance rates is crucial.
In conclusion, the Bay Area’s charm and appeal remain undeniable, but the changing climate and insurance landscape necessitate a more cautious approach to home buying. By conducting thorough research, seeking expert advice, and preparing for the evolving insurance market, you can secure your sanctuary in this breathtaking region while safeguarding your investment property against the unexpected. In a landscape of uncertainty, knowledge is your greatest asset.
Reach out to the Atlasa team today, and let’s talk!
SOURCE Atlasa Real Estate