California is a favorite place for Chinese people to buy houses and live, but due to the increasing climate risks, home insurance companies are withdrawing from the area, making it more difficult to purchase homes.
According to data from the California Association of Realtors (CAR), in 2023, nearly 7% of real estate transactions in California were canceled because buyers could not find affordable insurance, with over 61% claiming they couldn’t find insurance companies willing to underwrite for them.
In 2024, at least 13% of real estate agents in California canceled sales transactions because clients couldn’t find insurance coverage.
Dan Daniels and his wife spent a year searching for a house in Northern California, but when they finally found the perfect property, they couldn’t get insurance companies to cover it.
As California faces increasing climate risks, Farmers Insurance, Allstate, USAA, and Hartford have previously announced suspensions on issuing new policies to homeowners in California. State Farm stopped selling new home insurance in the state last summer and sought to increase rates for certain residential policies by up to 52%.
In Daniels’ case, they were quoted “having” insurance when looking at a property in Yreka. “We were informed that we could purchase full insurance for the specific property we were buying,” said California retiree and pastor, Dan Daniels.
However, the reality was different, even though their offer was accepted. “When we found out no insurance company would underwrite the property, we were very disappointed,” Daniels said.
Given the difficulty in obtaining home insurance, the California Association of Realtors now includes an insurance contingency in purchase agreements where buyers can cancel the purchase contract if they are unsatisfied with available insurance options and premiums.
Jameson Tyler Drew, CEO of Anubis Properties in Los Angeles, said that the rising home insurance prices have decreased their transactions by about 5% to 10%. He added, “Unfortunately, the last thing people think about when they go out looking for houses is whether they can get property insurance. But major companies have canceled tens of thousands of existing policies and are no longer accepting new applications.”
Drew explained that it’s not always entirely possible for real estate agents to inform buyers in advance if properties can be insured to avoid wasting time and money.
As insurance for high-fire-risk areas becomes increasingly difficult to obtain, buyer hesitations and concerns are growing, leading to a decline in home prices.
Some buyers complain that real estate agents should inform them early on whether properties can be insured to avoid wasting time and money.
Drew explained that it’s not always entirely possible. “There isn’t a map that can tell real estate agents where properties can’t be insured or where insurance rates are above normal,” he said.
When viewing properties on Realtor.com, all climate risks such as wildfires, floods, air quality, extreme heat, and strong winds are listed in the environmental risk section. Applying map filters to view risks in specific areas when searching for homes is essential now more than ever.
Bankrate’s research indicates that USAA, Chubb, Nationwide, Travelers, and Encompass are among the best home insurance companies in California. However, these companies may not guarantee coverage for every home. Insurance companies are actively formulating policies in California, but the number of available policies has been reduced.
According to a nationwide analysis by Forbes Advisor, an average policy with $350,000 in home insurance costs $1,678 annually, while $750,000 in coverage averages $3,068 per year.
In California, the annual cost of home insurance with coverage amounts of $200,000 is $782; $350,000 is $1,129; $500,000 is $1,455; and $750,000 is $2,139.
You might wonder why home insurance rates in California are lower than the national average. This is largely due to California’s strict consumer protection laws. California laws, particularly Proposition 103, prohibit insurance companies from raising rates by more than 7% without approval from the state insurance department, leading to unsustainable low home insurance rates, especially in high climate risk environments.
If you want to lower your home insurance premiums, Bankrate has several suggestions: reinforce your home against wildfire damage, minimize claims if possible, increase your deductible if affordable, improve your home’s security, and inquire about discounts from insurance companies. Policies are usually renewed annually, so spending time discussing potential missed discounts and recent ones with your insurance agent is worthwhile.