This week on Monday (24th), the California Department of Forestry and Fire Protection released an updated map of high fire danger areas in Los Angeles County, significantly expanding the range of areas at high risk of wildfires. Some residents are concerned that even though their homes are not actually in fire-prone areas, they are facing an increase in insurance premiums.
Janice Chen, an agent for Farmers Insurance Company in the city of Industry, mentioned in a recent interview that besides representing Farmers’ insurance business, she also represents other insurance companies. She explained that after receiving the updated fire map, insurance companies generally adjust rates for affected areas, but so far, agents have not received any notices of price hikes from insurance companies.
Janice said that while home insurance rates fluctuate every year due to various factors such as wildfires, claim rates, or construction costs, they do not increase arbitrarily. She stated, “If an insurance company wants to raise rates, they need to submit a rate increase application to the California Department of Insurance for approval before prices can change.” She added, “Insurance companies cannot adjust prices the next day just because the wildfire risk index in an area has risen. That is not allowed.”
Regarding the question raised by some residents about why their insurance premiums are increasing even though their homes are not in high-risk fire zones, Janice explained, “It’s because the costs of all insurances in California have risen, claim rates are too high; not only wildfires, but other disasters have occurred as well.” Therefore, residents are likely to experience premium increases in the second half of this year following the wildfires at the beginning of the year.
Due to various reasons, some insurance companies have chosen to withdraw from the California homeowner insurance market, no longer accepting new policies. Additionally, some residents have received letters from insurance companies informing them that they will not be eligible for renewal in the second half of the year. According to Janice, this situation has indeed occurred, but some insurance companies can withstand the insurance conditions in California and are returning to the California insurance market.
Janice explained that home insurance not only provides fire insurance but also covers damages from various accidents, including water damage, wind damage, and incidents like vehicles crashing into homes.
Multiple factors determine the level of home insurance premiums, including the size of external disaster risks, the homeowner’s insurance claims history, and the degree of protection the homeowner provides for their property.
For example, if a homeowner has made multiple accident claims over the past five years and has a poor record of home losses, whether it is an investment property or a primary residence, they may be denied when purchasing home insurance. Therefore, she advises homeowners to handle minor home damages themselves as much as possible to avoid impacting their ability to buy insurance.
Furthermore, homeowners who have installed fire and theft alarm systems, as well as those connected to ADT security systems linked to the police station, may receive discounts in case of accidents, as they are automatically connected to the fire department or police station for immediate protection. Additionally, using expensive fire-resistant materials in construction may help homeowners save some costs.
She also recommends homeowners to bundle their home and vehicle insurance with one company whenever possible to enjoy discounts, potentially saving a significant amount over the year.
Janice suggests that when purchasing fire insurance, homeowners should compare offerings from at least three insurance companies to see which company provides the most suitable coverage, service, and rates for their property. Some homeowners may only own a property for a short period and plan to sell it soon, in which case purchasing basic home insurance is sufficient.
Lastly, Janice emphasized that after homeowners apply for insurance, insurance companies may request improvements to the property with a deadline. If homeowners can make the necessary improvements on time, it will reduce the risk of being denied insurance when purchasing it.