Homeowners in high fire-risk areas are upset over soaring insurance rates

16 Sep
Fire risk and increased home insurance rates

There are roughly 900,000 homes that span 13 states, almost entirely in the western United States, that are considered at “high” or “very high” risk of wildfires.

According to a recent article in the Los Angeles Times, the Stoffan family in Greeley Hill, California has seen their homeowners insurance cost double to $5,100 in a year due to the fire risk in their area.

This is despite the fact that they added a 50-foot lawn buffer around the house and even installed landscaping that is fire resistant. Currently, their property carries a high fire risk rating which has pushed their insurance rates up so high they are considering moving to a different area.

The Stoffan family is not alone, especially in California where homeowners have seen insurance rates skyrocket as insurance companies have become concerned about the high fire risk. Many areas have suffered drought conditions for the last four years, which makes fire risk even higher. The 2013 Rim fire is just one example of wildfires that are fueling the insurers fears. The Rim fire burned over 250,000 acres around the Yosemite Park area.

It’s Not Just California

According to CoreLogic’s 2015 Wildfire Hazard Risk, there are roughly 900,000 homes that span 13 states, almost entirely in the western United States, that are considered at “high” or “very high” risk of wildfires. The cost to reconstruct these homes is a mind-bending $237 billion.

This figure represents a huge jump from the 2013 report, which put the value of the at-risk homes at $189 billion. The report shows that California, Colorado and Texas have the largest number of properties that fall under the “very high” risk category. The properties in just those three states are valued at $36 billon.

CoreLogic assigned a numerical risk score to each property in the study, which ranged from 1 to 100. Properties that ranked between 81-100 were considered high-risk. The report looked at over 250 geographical areas, here are the top five when it comes to fire danger:

  1. Riverside/San Bernardino/Ontario, California
  2. Sacramento/Roseville/Arden/Arcade, California
  3. Austin/Round Rock, Texas
  4. Denver/Aurora/Lakewood, Colorado
  5. San Antonio/New Braunfels, Texas

Insurance Companies Are Protecting Themselves

Insurers claim the premium increases are necessary to protect themselves from the cost of replacing homes that burn down in drought stricken areas and the fact that more and more people are moving into high-risk areas.

It is not just wildfire areas that are experiencing higher rates. In Florida, many insurers have refused to even write polices in areas that have been hit by hurricanes. This has left many homeowners with only one option, state run insurers that step in when private insurers leave the market.

In California, some homeowners have been pushed into the California Fair Plan Association, which is an insurance industry organization that provides limited coverage in extremely high-risk areas where options in the private sector are limited or non-existent.

While the situation is not quite as dire in wildfire risk areas, it may head that way. According to industry experts, most western states still have a competitive homeowners marketplace, but with each wildfire, insurers may decide to leave the market, or more probable, raise rates.

Insurers also use the ratings of local communities ability to fight fires when calculating risks and setting rates. ISO, a firm that specializes in statistics and analytics provides rankings to insurance companies. Communities are ranked from 1 to 10 based on their fire suppression systems. A class 1 community is considered the most ready to battle a fire.

A Few Tips

The National Fire Protection Association offers the following tips for homeowners in high-risk areas:

  • Clear dry vegetation such as grass, leaves and branches away from the house to create defensible space.
  • Replace or repair shingles or roof tiles that are loose or missing, this prevents ember penetration.
  • Cover attic vents with wire mesh to prevent sparks from entering the home.
  • Assemble emergency supplies in a safe spot.
  • Make sure all family members are aware of planned escape routes.
  • In the event of a fire in the area, stay aware of the latest news.
  • Once evacuation orders have been given, leave immediately.
  • Stay away from your home until it has been cleared for return by local officials.

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