San Francisco Home Insurance Update - 2024
I recently watched a webinar with Elbert Taylor of Farmer’s Insurance in San Francisco this month and I wanted to share some of the high points:
“The whole purpose of insurance is to get you through a catastrophic event, not every event”. Talk to your agent if you think you may need to file a claim. Even claims that don’t pay out anything may prevent future insurance, so it may not be worth it to file one. He said he’s got someone who filed an $800 claim a few years ago and now she’s paying $5000+/year because she didn’t know any better.
Some surprising exclusions on policies: He gets calls during winter storms for water leaks at the roof (and probably windows) or flooding at the foundation level and those problems are often not covered.
If you get a notice of cancellation, do NOT wait until the last minute to sort it out. Call your insurance agent ASAP (and probably others, to be safe). Sometimes repairs, updates or fixes can help salvage the policy. Sometimes figuring things out takes MONTHS. Some of the hardest policies to find right now are: HOA insurance for the building, landlord insurance (which is a MUST HAVE for landlords), and insurance for single family homes of a certain age that haven’t had their systems updated.
He goes on to say that insurance companies are using technology to check on the properties they are insuring. They apparently have about 99% of America’s properties in photos. They look at things like the roof, paint/other exterior items. On the real estate side, I have heard of insurance companies coming to properties AFTER closing to check the condition of your systems inside the wall like plumbing, electrical, etc., and if they don’t like what they see, they drop the coverage or require expensive changes.
Depending on your coverage/replacement costs, they may require you to install things like full-house water leak detection. He says water loss is one of the other large losses he sees after from wildfire damage. If you are insuring over 1 million dollars, they’ll also want things like an automatic gas shut off for earthquakes and also want you to add burglar/fire monitoring. The above items can be an additional expense after closing.
For older homes, older roofs (even if they aren’t leaking!), old circuit breakers or fuse boxes, and galvanized plumbing are all issues. Some circuit breakers brands to be on the lookout for when looking at houses are: ZinsCo/Sylvania, Federal Pacific, and old fuse boxes.
How did we get here?
Locally, during the pandemic, the California Insurance Commission didn’t allow insurance companies to raise their rates. When we resumed normal life and everyone went outside of their homes again, claims skyrocketed. CA still did not let these companies raise their rates. Inflation (for building and otherwise) + the cost of claims payouts made insurance companies decide to leave the state.
Be aware that this is not just a localized event - wildfires, tornadoes, floods, and hurricanes are happening across the U.S. and these nationwide companies can’t keep up. Last year, insurance companies lost money in 18 states - that’s more than 1/3 of the USA. This is a frightening trend. Premiums are being cancelled or are doubling everywhere, even if you’ve never had a claim. It could have larger consequences for our economy if this continues.
The California Fair Plan was meant to be a last resort for fire-prone areas. You will need a companion policy with this and they may have some of the same requirements noted above. The Fair Plan covers basic insurance (fire, smoke, etc.), but NOT liability. Not water damage. Not theft. The Fair Plan is run by insurance companies, and their goal is loss prevention. They still don’t want to cover properties in poor condition.
Some other notes:
Earthquake insurance? Very expensive for buildings (HOAs), but you can get this for your own condo. He noted he personally would also get earthquake insurance in places in a liquefaction zone or near a fault.
Most insurance companies cap out at 3 million dollars in coverage - you would then need to find a surplus line after that.
He said even though insurance is harder to find, he would never do business with a company who has less than an A-Rated financial report.
Rates will increase in the short term, as every company has applied for rate increases with the state. The silver lining for that is that, hopefully, it’ll be less hard to find coverage once people are back. A small win: Farmer’s is going to increase their monthly policy allowance in California from 7,000 new policies to about 9,000 new policies. They used to run out of available policies within the first few days of new months, so it was nightmarish.
