Guide to California home insurance.
California may seem like the center of fun and sun, but homeowners in the Golden State can’t be so carefree. In addition to being the most wildfire-prone state, California has a property crime rate that’s rising in certain cities. There are many reasons why California residents should purchase a homeowners insurance policy. What’s more, most mortgage lenders require applicants to have insurance before they sign on the dotted line.
A typical homeowners insurance policy covers dwellings, additional living expenses, liability and personal property (up to a certain limit). But there may be some variation depending on who your provider is. It’s important to understand what your policy includes and excludes so that you can determine whether you’re fully covered. Since different states have different policies and laws, we created an insurance guide with information and resources just for Californians.
Supplemental insurance needs in California
While fairly comprehensive, basic homeowners insurance does leave California homeowners vulnerable to certain disasters. Depending on where you live, it may be wise to consider getting a supplemental policy or endorsement to protect yourself.
California residents are regularly threatened by wildfires. Homeowners insurance generally covers losses and damages following a fire. But as we’ve learned from recent instances in Napa and Sonoma counties, supplemental coverage may be necessary. Consult this map of fire-prone areas and the California Department of Forestry and Fire Protection’s website to decide whether you need a rider or an endorsement.
Many Californians have experienced their fair share of earthquakes. There are more than 2,000 earthquake faults throughout the state and about four moderate earthquakes (with a magnitude of at least 5.5) erupt each year. While earthquakes are a concern for nearly everyone in California, only 17% of homeowners have earthquake insurance. If your insurer doesn’t offer this kind of coverage, you can also turn to the privately managed and publicly funded California Earthquake Authority. Their site even has a premium calculator, which estimates the cost of earthquake insurance.
Though they’re the most common natural disaster in America, floods usually aren’t listed as a covered peril under the standard homeowners insurance policy. Luckily, you can get coverage for flood damage from a private insurer or through the National Flood Insurance Program (NFIP). The Federal Emergency Management Agency (FEMA) runs the NFIP. You can check flood maps on FEMA’s website to assess your flood risk and contact local insurance agents to purchase an NFIP flood policy. Spoiler alert: Every county in California has been declared a federal disaster area at least once for flooding.
Standard homeowners insurance policies also tend to exclude coverage for any event that’s considered to be an “earth movement.” Homeowners in regions susceptible to landslides should consider a Difference in Conditions (DIC) policy. Also known as gap coverage, this is typically a separate insurance policy. The California Department of Insurance (CDI) website lists which companies offer DIC policies.
In addition to weather-related concerns, California homeowners may want to consider animal liability insurance. The state holds you liable for any injury or property damage your pet causes regardless of how the incident occurred. And with the ninth-highest median household income in the country ($67,739), it’s safe to assume that Californians have valuables in their homes. If your possessions are worth more than your policy’s maximum payout, you may want to look into getting high-value item insurance. Getting your valuables appraised and making a video inventory of everything you own can help you determine whether additional coverage is necessary.
Lastly, if you have a home office, an abundance of electronics or a domestic worker, you probably need to purchase separate endorsements or find an insurance provider, like Hippo, that provides coverage for such things in a standard insurance policy.
Lastly, if you have a home office, an abundance of electronics or a domestic worker, you probably need to purchase separate endorsements or find an insurance provider, like Hippo, that provides coverage for such things in a… CLICK TO TWEET
California insurance laws
When fires ravaged Southern California in 2003, many homes were underinsured. Since then, a few pieces of legislation have been passed to provide extra protections for homeowners. One, known as Senate Bill 64, allows homeowners and insurers to mediate disputed claims through the CDI at the cost of the insurer (up to $1,500). Another piece of legislation, Senate Bill 1855, requires insurers to provide better disclosure about replacement costs, expressly stating that the cost to rebuild a home may exceed policy limits on certain policies. Others (Assembly Bills 2199 and 2962) give homeowners flexibility in reconstruction timing and guaranteed one-time renewal in the event of total loss.
Average homeowners insurance costs in California
Determining how much you should pay for homeowners insurance isn’t always easy. Policies tend to be more expensive in states that are most susceptible to large-scale natural disasters, and they’re always pricier for homes with a higher value. Even your dog’s breed can affect the monthly (or annual) insurance bill. In 2015, the average premium in California was $986 — just below the national average of $1,173, according to the Insurance Information Institute.
Of course, as the nation’s most populous state and the country’s largest insurance market, California has rates that vary widely. To save money on your homeowners insurance bill, check out some common insurance discounts and speak with your provider to see if you qualify for any of them. You can also take up some home improvement projects to keep premiums affordable.
Additional insurance resources for Californians
Like many other states, California has its own Fair Access to Insurance Requirements (FAIR) Plan to help homeowners that don’t qualify for policies in the open insurance market. This makes insurance more readily available for… CLICK TO TWEET
Like many other states, California has its own Fair Access to Insurance Requirements (FAIR) Plan to help homeowners that don’t qualify for policies in the open insurance market. This makes insurance more readily available for residents in high-risk areas or with otherwise unattractive risk profiles. Though it’s helpful, coverage for FAIR Plans is limited. Coverage for perils like windstorms and hail require an extra premium. That’s why a FAIR Plan should be a last resort if you cannot find a policy elsewhere. In fact, the CDI suggests that FAIR Plan policyholders shop for a different insurer at least annually to find more comprehensive coverage.
For more information about homeowners coverage in California, check out the CDI website, call the consumer helpline (1-800-927-4357) or visit an office in person. In addition to providing a residential insurance guide, the CDI can help you compare homeowners policies and file a request for assistance if an insurance company, agent or broker treats you unfairly. They also offer advice that helps residents avoid scams after natural disasters.
The California Residential Property Insurance Bill of Rights, which outlines consumer and insurer rights and responsibilities, is another helpful tool for homeowners to keep handy. Insurance companies are required to issue it to all policyholders every two years, but the CDI can provide a copy at any time.
If you have any questions about homeowners insurance in California, contact a Hippo specialist. Whether you need a quote or additional information, we’re here to help!