State Farm halts new property insurance policies in California
ocregister.com
ocregister.com
They pull out to light a fire under the ass of legislators. And then they resume business as usual.
Do you know what kind of legislative changes they're hoping to make?
Further, they didn’t close down the shop they just stopped putting a certain type of inventory on the shelf - they will continue to sell auto and other types of insurance that are less exposed to wildfire or are otherwise rate adequate.
Yes, this happens usually when you are a C-level executive, and not a software dev intern, like this guy. He hasn't even started his career...
I hope this not true for most people. I feel like most people I work with respond well to honesty as opposed to varnished corpo-speak. I’m a new senior engineer and have just started speaking in a relatively unguarded way if that makes any difference.
I'm sure there are some companies that tolerate it when an employee criticizes them (or call them dishonest/disingenuous, as in this case) in an open, external forum, but this is most definitely not the norm. If you work for such a company, then lucky you, I guess?
I think you are more likely to get in trouble for shit talking internally than externally, if only because the people who care are more likely to hear.
I don't see any, that's his personal view on the history of the company, which is implied he knows slightly better than your average Joe
Mere rumors can cause material stock price changes, that could cause direct trouble, or even trigger an SEC investigation.
"Y-y-yes, I specifically emphasized that I work at State Farm so I know what's really going on, but I used 'they' to emphasize that this post has nothing to do with State Farm".
But I guess this subthread is getting longer than it deserves to be. I'm not saying OP did anything wrong, but people use throwaway accounts with a reason. Employees have been terminated for much dumber reasons.
Insurers have no control over either construction costs nor wildfire risk. All they might do is adjust premiums to accurately reflect those costs. By raising premiums they discourage people from continuing to live in fire-prone and/or high construction cost areas.
Instead we put a price cap, taking away that mechanism, leaving insurers at the mercy of rising risk and costs, and preventing people from feeling the incentives to change things.
Adjusting supply and demand, however, inflicts a lot more pain, so it ends up being a last resort, if even that.
Indeed, and they insist on doing so in the most fine-grained, bureaucratic way imaginable:
> Established in October 2022 and touted as a first of its kind, the state program requires insurance providers to discount policies for property owners who mitigate wildfire threats by installing fire-rated roofs, enclosing eaves and creating ember-resistant zones. Insurance companies have 180 days to submit a wildfire risk assessment or score, which the state can appeal.
Are these people to abandon their homes outright?
Certainly, it would be a lot harder to get a new mortgage underwritten, which makes refinancing mostly impossible and makes selling difficult.
Given that the property would be difficult to sell, I'd imagine even if the contract allows it, lenders wouldn't foreclose for lack of insurance if insurance is unavailable.
Really, I think the way to move forward on the issue that so many homes are built in areas they shouldn't be is to make available insurance policies that cover permanent relocation, rather than rebuilding in place. You can still live there until it burns down, at which time, you must move elsewhere and the lot is deemed unbuildable for the forseable future. With some sort of provision to manage windfalls from changes in conditions allowing safe construction in the future. (It's not fair if you force people out, but ten or twenty years later, let people in again; OTOH, maybe one hundred years later, it will make sense?)
The recourse is usually foreclosure when the borrower doesn’t meet the essential terms of the mortgage agreement. It doesn’t matter why the borrower can’t get insurance any more than it would matter why the borrower couldn't make payments on the loan.
If coverage was offered, who should be the one subsidizing it? Private companies? No way, they never would. Government? That's just a regressive policy funneling money to a relative well-off (homeowners) group of people.
Also in general I don’t believe you can get a mortgage without home insurance? So people buying these properties would have to come in cash.
I think insurance companies cover customers because the customers pay for the insurance.
You're saying that because profits for insurance companies aren't at the level the insurance companies want, that they can say - because it's illegal to own an uninsured home, where people can and can not live?
That seems like an overreach of power of a private company.
Perhaps this was lost, but areas where insurance companies are deeming too risky to live is growing given climate change is real and weather patterns are shifting - sometimes drastically - to create more powerful storms.
This is just going to continue to happen in a game of Russian Roulette.
When they next burn down, yes.
Last year, a thousand houses a few miles downstream fell into the water. This year, my insurance company cancelled my coverage, and I can't find anyone else who will insure me. What I'd like is for premiums to be raised for people who bought their homes in a safe area, to pay me my million dollars in profit when my house falls into the watter. This is my Current home. Am I supposed to just abandon it because no one will buy it?
So, the answer to your question, is yes. Home prices go up and down. Yours is now worth zero because of your bad decision. It is not the job of other people, to pay you for your mistake.
this also applies to basic language skills. i suggest that whatever advice you have for the previous hypothetical person, you apply to basic social interaction in your own life.
but maybe I'm wrong, and you did not read the comment to which I was replying. in that case, I suggest that when you read a comment, you should see the comment it's rebutting, prior to posting yours. this also, is a basic social skill.
I'll start you off: I do not own a house at all as I travel internationally and move around too much to stay in one place over a few years. I would also never purchase one in a risk zone, since there are thousands of others available w/o the risk, and they don't cost more.
There'd have to be restrictions to prevent abuse and the government buying 1M+ vacation homes (or whatever), but it'd make the problem go away.
As they’re doing with energy, they could implement progressive premium schemes for income redistribution purposes.
The richer public services and lower inequality should keep the state’s population boom thundering on.
Please God no. I already lose more than I get to the government in taxes on every marginal dollar I make.
Somehow, though, the “bailout” boogeyman is never called out for the states, even though they got hundreds of billions of essentially no-strings-attached “Covid relief” dollars from the Feds.
The idea that individual states could have fiscal responsibility and no funding from the feds would require that the federal reserve stop that fountain of new money. But the economic priests have decided that this must never happen, lest the plebs stop having to work as much.
not sure the State is equipped to take over the first level of insurance...go to the DMV some time and ask if that is who you want to deal with when you have roof damage from hail etc
a price cap on insurance means that properties in the urban cores should be able to continue to get policies, and properties in the woods will be essentially uninsurable. if you can reduce the number of houses being built in the woods, you can let a wildfire burn without having the bad press of losing so many homes.
The Federal department executed the burn and it went wild, and is the largest fire in recorded history in that area now, taking out an entire town plus other structures and causing the evacuation of Los Alamos National Laboratories at the same time. you can find the details easily.. there is a 70 page "final report" from the agency perspective. This is reality.
Historical controlled burns (https://en.wikipedia.org/wiki/Native_American_use_of_fire_in...) worked because they happened frequently and kept fuel in check while encouraging trees that were resistant to or even dependent on low grade fires. Fuel loads are dramatically higher than historically however.
Now we've also got massive areas of forest dieback due to climate-driven bark beetle outbreaks. Trees that do survive burns but are stressed by them are more vulnerable to pests, just like drought stress. https://www.fs.usda.gov/ccrc/topics/bark-beetles-and-climate... So controlled burns even done effectively may still result in unwanted tree dieback.
A much safer potential cure here would be a massive increase in targeted grazing on federal land to reduce understory fuel loads, but this is also a nonstarter politically in many areas especially in National Parks. We are still maintaining this myth of virgin wilderness untouched by the hand of man.
State and federal government simply isn't competent enough to handle this given the political realities in a democratic system. Basically what's going to happen is that the most vulnerable communities will get scorched out of existence, and we're just going to have to live with the impact of more wildfires until nature sorts itself out. Americans just can’t psychologically accept being told they don’t get to develop anywhere they want.
Yup! I live in the Sierras. Everyone in this thread talking about controlled burns needs to say "California has just spent a century pursuing a policy of fire suppression" a few times.
The fuel loads are insane, these fires have been turning into giant firestorms with their own weather systems in a matter of 2 or 3 hours during the summer. I've watched it happen a few times, frightening. I suspect you can't solve this problem with fire because even if you are burning the brush wet there is still enough fuel to dry the forest out and burn it to ash.
I personally think the state should tell insurers that they only have to provide insurance in wildlands if the home/property meets stringent fire safety rules around defensible space. My house isn't even in the coniferous forest (I live in the chaparral) and it has set backs, greenzones, the works. I get so frustrated when I'm watching news coverage of the fires and the house is surrounded in pine duff and has giant pine trees right next to it.
> much safer potential cure here would be a massive increase in targeted grazing on federal land to reduce understory fuel loads
Yeah, my dad, a California native, who studied forestry at Davis always says that the solution in millions of goats. Ironically this spring the local Sacramento news reported that there was a shortage of goats to clear brush and that was just for commercial landscaping in the greater metro area. So not only is not feasible because of green hand wringing but also because we just don't have adequate goats.
Most ranchers who do brush control grazing get paid for doing so. This is the opposite of the federal policy today, where ranchers have to pay for grazing rights on BLM land. Not to mention the fact that some places we used to graze sheep on like Yosemite or Sequoia National Parks have a blanket ban on commercial grazing.
Instead, what we have is wildlife conservation groups killing bills to expand grazing in CA. https://mountainlion.org/2021/04/29/ab434-california-state-p...
that's not the start of a conversation that finds solutions. Obviously there is lot of hurt and urgency, also there have been a lot of bad bills, also there is a lot of private land grab on public property, also the existing policies have led us here.
AND.. when I read the actual research, there is far more already known, than anyone at the negotiating table seems to know.. so you get bullies and spies, angry side comments and behind-the-scenes demands..
far, far too late to just call the other side of the table uncomplimentary names, if you are serious about this.
There should be alignment of interests between environmental groups and rural people who don't want their communities destroyed by wildfire. Neither of them want the forests burned down. Instead, these groups pursue a singleminded focus on attacking anything that doesn’t comply with their dogmatic pursuit of wilderness untouched by anything other than recreation.
as i understand it, there's been a fair bit of progress in the last couple years regarding best practice for wildfire protection in populated areas. you can do a lot by removing underbrush and building firebreaks around a town, as well as relatively simple measures like disallowing cedar-shake roofs. there's probably a future where properties in towns that implement strong wildfire protection plans can continue to be insured, and towns that don't cease to exist. but that only solves the problem for towns, i don't see what can be done for properties in the woods outside a town's firebreak.
NorCal with the thick forests, you’d need to clear cut so much, you’d be irreversibly altering the landscape and will probably get other bad things for it, such as erosion and landslides. The vegetation will also try to grow back aggressively (NorCal is a lot wetter than SoCal). So you’d end up doing this over and over again. It’s unlikely to be economical.
Ah, I see you've never tried to do anything involving water or drainage in California
Firefighting resources are already stretched thin. Adding more bureaucracy on top of these tough logistics make any preventative burns impossible to plan since CARB can just deny it the last minute.
CARB performs a useful function (acid rain anyone?), but if you asked most people in CA, I suspect wildfires will come in a lot higher on the list than smog from occasional burns. With uncontrolled fires, even more smoke and who knows what else goes into the air already.
Nobody wants the LA smog of the 1970s back, but controlled burns are largely impossible much of the year due to their effects on air quality.
Wildland firefighters - of whom I count several among my cousins - are between a rock and a hard place on this issue. They spend more of each year in “fire season” in part because they cannot pollute the air during “not fire season” with controlled burns.
Hopefully one day we get a study that shows the fires end up spewing even more pollutants than any controlled burn, so the net effect of not doing these controlled burns is likely a lot worse.
Allowing new pollution spewing gas guzzlers to continue to be produced and sold until 2035 is absurd. They should ban production in 5 years and ban use by 2035.
For personal vehicles that would hit the sector of population least able to afford an EV. Incentives and cash for clunkers type programs work better than forcing a financial burden on folks.
The other problem is that we don’t yet have good alternative to heavy diesel trucks. Sweden is experimenting with some cool options and we need a similar infra investment: https://www.euronews.com/next/2023/05/09/sweden-is-building-... and https://www.popularmechanics.com/technology/infrastructure/a...
The problem is that the last article is from 2016. All the investment is still going to long battery ranges and such, when if we built infra like this, trucking companies would switch due to much lower costs.
To a naive mind that doesn't know much about insurance this sounds untrue. I'd be willing to insure houses myself with as many funds as I could get at 33% of the property value per year, for example.
Say 10% of your claims are against some natural disaster, and they will either not get triggered at all, or all get triggered at the same time. That's an uncomfortable situation - this is what is called catastrophe risk. Ideally as an insurer you want lots of uncorrelated risks and the strong law of large numbers is on your side.
Insurers typically outsource such catastrophy risks (to some extent anyway) to reinsurers, ie insurers to insurers, but (a) that's not a hard guarantee of risk mitigation and (b) they still have to pay for it.
I can imagine that in this whole quagmire, and considering what people would pay for insurance, it's easier to just pass.
Also, California cities don't even have the money to bulldoze the trees in an N-mile radius around them. California did log the entire Sierra Nevadas a hundred years ago, yes but those trees were valuable and there actually weren't as many of them (due to the fire ecology). A hundred years of fire suppression forestry and logging have turned the Sierras into a giant thicket - filled with small trees and shrubs with no market value, not easy to remove and ready to explode.
insufficient detail, plus people lied in writing to get paid in Sacramento because "who could know"
basically a BS statement, right?
We have a national disaster insurance entity[0], but coverage from them is tied to insurance from an insurance company. So as insurers start to refuse to insure houses at proven high risk of natural disaster, then the EQC coverage isn't applicable either.
It will suck for some communities, but it's the reality of climate change that some of those changes are gong to suck.
And I just can't believe that California, like Australia, has allowed so much residential development in ecosystems where fire is a natural part. Not sure if it's the triumph of hope over facts, or just plain ostriching.
Eventually it reaches a point where the state puts so much burden on the insurance company that they decide it's uneconomic to operate there and leave. Any insurance company refusing to write should be interpreted as a whack with a clue-by-4.
My guess is that it's a structural dynamic - something like a hurricane is bound to trip the cat reinsurance thresholds for all the insurance companies, which means they have very little incentive to actually verify claims/monitor fraud, since it's the reinsurers eating that cost.
You do lose the market signals about the real cost to insure when you do this though. Ultimately we have to change where we build but that's a HUGE undertaking and it's unclear where the political will for that will come from.
Which it's going to do with insulin, but the market for that seems broken. The property insurance market is pretty competitive.
Except that they’re doing a horrible job and PGE continues to rob people with impunity.
https://en.wikipedia.org/wiki/Citizens_Property_Insurance_Co...
Behold, the California Fair Plan:
Technically not a State agency. They force registered insurers to participate in a pool and insure homes. It should be called "California Forced Plan" or something worse.
In practice, it's a horrific thing. I know people paying $6,000 per year for home insurance when, in other parts of the State you can insure a home for $800 per year.
Fires, you say?
Yeah, no, not a single bush burned in their neighborhood in 30 years.
What happens is that some incomprehensible grouping of State, City, County...whatever agencies get together and declare entire regions as high fire hazard zones. That's pretty much a license to rape and pillage.
Check out the map:
https://osfm.fire.ca.gov/media/6636/fhszs_map.pdf
The whole thing is, from my perspective, a horrific authoritarian overreach.
Why do I say this?
Look at those areas and research how many homes exist in them compared to the rest of State. Then get data on how many homes per year burn down due to brush or forest fires. That part is important. You cannot count homes that burned down because a 3D printer caught fire in the garage or someone started an oil fire while cooking and could not put it out.
If you are going to classify an entire region as an extreme fire danger region, you'd better have lots of fires caused by events well outside anyone's home. You know, brush fires.
The truth of the matter is that the numbers don't justify any of this. They are taking advantage of people.
There are approximately 12 million housing units in California [1]. Out of those, between 2005 and 2022, some 65,000 structures were lost o wildfires.
That averages out to about 0.03% properties lost per year to wildfires.
And that number is deeply skewed by abnormal way-out-of-the-norm activity during three out of 18 years. If we take out these three data points we go from 65K properties lost down to 20K. Which means somewhere in the order of 0.01% of properties lost to wildfires under normal circumstances.
So, somewhere between 0.01% and 0.03% lies a sensible estimate. And for this ridiculous number they castigate a massive portion of the CA population with this high fire risk rating that causes their premiums to explode.
There's a lot more to this [3]. If you look at home fires at a national level (over 300K per year), the leading causes are cooking and heating equipment. And yet, once again, with 140 million housing units in the US, that number represents 0.2% of the housing units per year.
In other words, if we are going to talk about averages (not always a good idea), the national average for homes burning down due to fires not related to wildfires, is TEN TIMES greater than the percentage of housing units burned down in CA due to wildfires.
Conclusion: People are getting robbed. Insurance companies are just fine.
[1] https://www.infoplease.com/us/census/california/housing-stat...
[2] https://headwaterseconomics.org/natural-hazards/structures-d...
[3] https://www.thezebra.com/resources/research/house-fire-stati...
CA has required since the 80s that insurers that offer homeowner insurance also offer earthquake. However, after the ‘94 Northridge earthquake, 93% of insurers had either stopped offering or greatly restricted their property insurance underwriting in CA.
Now the CEA sells two thirds of the earthquake insurance policies in CA.
So if the insurance companies don’t step up and underwrite, CA may very well do just what you said.
Long term tax burden goes down, nobody lives in the hot zone
I wonder how it could work with existing fallow real estate that isn’t in those fire prone areas
So, how would some organization help move all those at risk people into existing vacant real estate in a way that benefits the at risk homeowner?
Don't like the way PG&E operates? Take it over and make it a public utility.
State Leg: crickets chirping.
> Homeowners are flocking to the likes of Florida and Texas, despite the growing threat of climate-related weather disasters, according to data from LexisNexis Risk Solutions reported by the New York Times.
> Property insurance costs are rising across the country, with premiums up an average of 21 percent since 2015. Those bumps are significantly higher in states that carry more climate risk, however, including Florida (57 percent) and Texas (40 percent).
https://therealdeal.com/national/2023/05/08/sun-belt-climate...
https://www.nytimes.com/2023/05/05/realestate/home-insurance... | https://archive.is/RRTW7
https://impactlab.org/map/#usmeas=absolute&usyear=2020-2039&...
https://subscriber.politicopro.com/article/eenews/2023/03/23...
> The president of one of the world’s largest insurance brokers warned Wednesday that climate change is destabilizing the insurance industry, driving up prices and pushing insurers out of high-risk markets.
> Aon PLC President Eric Andersen told a Senate committee that climate change is injecting uncertainty into an industry built on risk prediction and has created “a crisis of confidence around the ability to predict loss.”
> Reinsurance companies, which help insurers pay catastrophic losses, “have been withdrawing from high-risk areas, around wildfire and flood in particular,” Andersen told the Senate Budget Committee.
> He added, “Just as the U.S. economy was overexposed to mortgage risk in 2008, the economy today is over exposed to climate risk.”
https://www.eenews.net/articles/growing-insurance-crisis-spr...
> Florida came first. Then Louisiana.
> Now an insurance crisis that has swept across the Gulf Coast is spilling into Texas, where increasingly scarce property coverage has forced tens of thousands of coastal homeowners to buy policies from a state-chartered insurance program.
They probably shouldn't be, though: https://www.chicagomag.com/city-life/june-2017/climate-chang...
My ex-partner’s a geologist. She hated that article.
Seems to me you did not.
> I don't really agree that it makes sense to individualize risk like this so that one person gets completely ruined by freak occurrences.
An earthquake in California is not a freak occurrence. A fire in a fire prone area is not a freak occurrence. A hurricane in Florida is not a freak occurrence. A sink hole in Florida is not a freak occurrence. People not living in those areas should not be forced to subsidize those that do. It's not like people are being dropped in large numbers yet or that State Farm was the only insurer.
> Maybe if we're talking about particularly high-risk zones, but the entire state of California, inhabited by 44mn people and spanning more than half the West Coast, should be left out to dry?
Maybe California makes it too hard to refuse service to only certain people and this is the only way to handle it? Do you honestly believe they would leave money on the table if they didn't have to? There are other insurers there.
I don't know if this is California's intention, but I think limiting premiums is more effective at discouraging homes existing in hazardous areas than high insurance where the rich would simply lay the insurance. When fires burn through inhabited areas, state agencies have to attend to them to save lives, independent of insurance premiums. This costs the state money.
Some people are just in a bad place though altogether.
I don't know a good way to differentiate between the two.
For example, houses in New Orleans should be nearly $0 because of the risk, but since FEMA will rebuild your house in a flood, they aren't. There are houses there where FEMA has paid out 10x the current value because they've been destroyed so many times.
I understand people have attachments to their place of birth or upbringing, and that's fine. But the house prices should reflect that. Imagine instead of the home costing $300,000 and you have to get a loan for that, the house costs $300 but they give you a loan for $300,000 to rebuild if it gets destroyed. This would cause people to gravitate towards homes that are less likely to be destroyed because then you don't have to take on the $300,000 loan. It's standard risk aversion.
When you fix it so a business is guaranteed to lose money, they stop doing business in the state.
The irony of all the bureaucrats bullshitting about climate change to cover for a policy outcome of their making is not lost on me. Never change, California.
It seems they’re trying to make it so insurers simply can’t cancel your policy out from under you. Note how it specifies “renew”. These were people already paying for wildfire insurance and the law prevented them from being screwed over. Insurers just want a way out of paying up unless they can renew your contract into an absurdly marked up premium.
https://www.judicialhellholes.org/hellhole/2022-2023/califor...
Of course, the judicial environment is separate from the regulatory apparatus, and it seems eminently plausible that CA courts are much more willing to protect consumers from bad faith claims practices, etc.
That all being said, catastrophic[1] wilfdire claims are a huge problem in the P&C insurance industry because they make the actuarial math much more difficult, and CA has had quite a few over the past couple years. Where I live in CO, none of the well-known insurers will, as a rule, write home policies in the mountain regions for similar reasons in spite of the relatively friendly regulatory environment.
[1] a term with a rather precise meaning in insurance, referring to a single event which causes a large number of expensive and highly correlated claims
The reaction when houses burn should be "should have built using fireproof materials" or "that happens when you live in a forest" not "here's billions of dollars from more-responsible people".
The adjustment in cost is simply facing the reality that more homes are burning nowadays. They pay for your flood insurance as much as you pay for their fire insurance, and their premiums are moving up faster than yours..
Today them, tomorrow you
You may have not seen what a forest fire, like those NorCal gets, does to a house. The insurance companies will have to pay just as much to replace a yard with some scorched brick in it where a family of four used to live, with their cars, possessions, appliances, etc. The house is ruined whether the walls survived the 1000 degree heat or not, because everything in and around it is lost.
Now there's certainly a class of old wooden houses on grasslands that are vulnerable to becoming infernos from stray sparks.
Assuming they weren't always that vulnerable (and that's what we're talking about here: new risk), I'm just not clear who would pay for it to be torn down and rebuild with (magical?) bricks. Did the homeowners have to do periodic risk assessments and decide when to do this? Who would pay for it? What's their motivation? They have insurance after all. They'll just rebuild.
If the insurance companies were caught off guard by this, how is a home owner to know and preemptively rebuild?
The purpose of insurance is to socialize losses. But if a few participants in the insurance pool engage in outsized risky behavior, that’s not fair to the rest of the pool that chose significantly less risky decisions.
https://www.capradio.org/articles/2021/06/23/newsom-misled-t....
By fueling 'climate change' anxieties the California supermajority and the monopoly power company PG&E mask their deadly incompetence with massive media spends, stoking fear and with the inevitable result of insurance being withdrawn and businesses leaving the state.
It's a shame there's no credible political opposition in the state, the infrastructure is crumbling, street dwelling drug tourist visitors are out of control, we are not on top of water storage during the heavy rain cycle years that occur every 5-7 years.
If you exclude everything in an area with those issues, there will be very little left to insure in California.
Labor is scarce, demand is high (wildfires), and materials are expensive. I know a few folks in the trades out here and one is constantly at his lake house, the other is constantly on vacation or touring with his band.
Price caps for insurance policies -> no insurance policies.
Multi year environmental study requirements -> no new construction.
Decriminalization of theft -> rampant theft.
Eviction moratorium -> rent inflation and 800+ credit score requirements.
There's enough of this make a small encyclopedia.
For example, a big part of why they ranked Pennsylvania as a top judicial hellhole is that the venue rules for medical malpractice lawsuits was changed from "must file in the county where the alleged injury occurred" to "can file where the alleged injury occurred, where the doctor lives, or where the provider operates a hospital or office".
Some reasons Georgia is #1 are a big verdict against Ford in a suit saying F-250s have weak roofs that greatly increase the danger in a roll over accidents and a state Supreme Court ruling allowing a lawsuit to proceed against Snapchat from an accident where someone going 107 mph (they were trying to generate a post using Snapchat's Speed Filter that would show over 100 mph).
“If you have the Cash-Out Option or Agreed Value, congratulations! If you face a total loss, you will receive the replacement cost amount on your home whether you decide to rebuild there or not. If you do not, you will only receive the replacement cost amount if you decide to rebuild in the same spot. If you decide to cash out and move, you will receive the depreciated amount.”
A carrier leaving the market doesn't bode well. It is hard to enough to get on the property ladder for first time buyers, the challenge may soon become staying on it.
(I don’t have a $10K deductible because the savings over $5K wasn’t meaningful in my case.)
So, sure, you can absorb a ten thousand dollar deductible. Can you afford another twenty grand (or more) on top of that for some place to live while your home is repaired/rebuilt?
At the same time, the disaster created a construction labor shortage, and the price of construction increased 20-30% between the insurance payout and permit approvals.
Stricter regulations are required. In particular, it should be illegal to block permits for equal or improved structures, and the insurance companies should be on the hook for the total cost of reconstruction/buying a new home up to the day the homeowner moves in (minus deductible).
What I'm saying is that for anything major you're likely already going to be out of pocket for thousands, perhaps tens of thousands of dollars in costs that your insurance company won't cover in addition to the deductible. Maybe you have ten grand to piss away on a deductible. Do you have twenty? Thirty?
Living in a house with smoke damage while it gets repaired is significantly more harmful to your quality of life (especially if you're WFH) than driving a car with accident damage.
So, yeah, a high deductible seems insane to me.
Focusing on reducing the $10k deductible to e.g. $2k, but leaving the other $20k to remain seems like a backward strategy to me.
For a single-family home I would've been covered but the amount of loss-of-use coverage is generally tied to the rest of the coverage you've got which is tied to the value of your home. With the cost of 'short term' housing (at least in the Bay Area) you're likely to blow through your limits pretty quick even if you ignore all of the other costs related to loss of use (commute, food, utilities, etc.).
Keep in mind the vast majority of homeowners insurance policies aren't "we're going to make you whole", they're "we'll pay for certain, named events up to a dollar amount". The things that your carrier excludes are likely to be things that every other carrier in your state will exclude.
Besides the bet that you'll save money with a $10,000 deductible falls apart once you make a second claim in fifty years. The best numbers I could find suggest that homeowners typically file a claim every 9–10 years. You've likely already blown through the projected savings by the second decade, by year fifty? The lower deductible would've been much cheaper.
Are there cases of minor damage to burning houses? If it burns it burns? The price with deductible would only be lower proportionally to the maximum possible damage.
I had a flood in my house with a 5k deductible and when we told the restoration company we were going private on the services they magically reduced the price by 50% and we only paid 3k out of pocket. You also have to take into account that trades will jack the prices on insurance claims which is going to be baked into your monthly rate, so if you can go private when possible you can also save money in the long run.
Based on this thread, I just went back and re-priced them (my insurance has a nice-enough online quoter for basic transactions like this). The curve had shortened some and so, while I could pay $25K out of pocket, I upped my deductible to $10K and doubled my personal liability coverage. Starting next month, I'll be saving a little over $500/yr and have a more personal liability coverage to boot.
Amusingly, there are coverages that have a $500 deductible. Who the hell wants to even talk to an insurance company over a loss that doesn't significantly exceed a $1K deductible? My insurance discounts include a $495/yr discount for "no claims in the last 5 years". If I had a $500 deductible and had even a $2500 loss, I shouldn't submit it if it would remove that discount for 5 years...
Even choosing the highest deductibles doesn't really lower premiums significantly. There just doesn't seem to be a way to express to an underwriter "really, I'm only going to call you if my house is a total loss". It's probably just the same oligopolic/info-cartel consolidation that is plaguing the rest of the economy. But it sure is frustrating.
Also on the topic of insurance, it really irks me that insurances are allowed to have caps on liability coverage. The entire point of insurance is to cover long tail risk. Instead they upsell you on additional coverage that still doesn't cover the long tail risk.
25-30 years is about the lifespan of a shingled roof depending on climate.
I agree it’s routine maintenance. It’s also 10k-20k in some areas. I much prefer insurance being used for a large issue vs using it to have a tree removed because it was hit by lightening 1-3k.
This is what I have done. Cash and semi-liquid investment vehicles are king if you have enough to cover the worst case. I get called a "crazy person" whenever lack of coverage comes up at friend & family gatherings, but I honestly don't feel any anxiety over it.
Worst case scenario, my home burns down or experiences some other total loss and I have to pay 100% out of pocket to put a roof back over my head. Yeah this sounds kinda bad, but there are a lot of statistics in my favor here. I WFH full-time, so the probability of me not being at home when something "weird" happens is diminishingly small. Additionally, I can't recall the last time I saw a fire truck heading to an actual structure fire in my community. These newer homes are kinda safe by default. Water/wind damage is a concern, but I've been through enough hurricanes to know that TWIA coverage is the biggest scam ever perpetuated on homeowners in the gulf coast region.
Worst case is your house fire burns down the neighbourhood. This is why while self-insuring your own property is fine, liability is something even billionaires insure.
What kind of coverage does the typical home owner have along axis of "my house fire also was the eventual reason that 20 other homes burned down"?
That said, I do agree with you with regards to insurance. Health, car, house, etc insurance all seem to be closer to payment plans rather than actual insurance for catastrophic events. If there were viable options that had 10k or even 50k deductibles that noticeably lowered premiums, I would sign up.
No, but it has enough that I can outsource the litigation to an insurance company.
I personally know one case, granted in apartments, where the lack of renter’s insurance permanently financially disabled, and one where it caused years of grief.
My homeowners policy, in an area with pretty minimal disaster risk, is roughly inline with or somewhat below the national average (per dollar of property insured) and my premium went down by $1 compared to last year.
Have you ever tried doing home repairs? Those costs go up 20-30% per year.
In one day.
I've managed to keep my premium low by increasing the deductible to the max and also not increasing the covered amount (replacement cost). Even though I own the property, I'm not balsy enough to completely drop coverage. But, I also don't live in an area where the land is 80%+ of the value. For reference, I pay probably about a quarter of a percent of the insured value per year with a $3000 deductible, which seems pretty darn reasonable compared to comprehensive/collision car insurance.
So the risk goes up, but premiums don't.
You cannot have it both.
I think this is unfair and un-business-wise in another sense because it fails to account for regional and local risks. Here's the best all risk estimate map by the US government[0].
0: https://hazards.fema.gov/nri/map
Many locations shouldn't be occupied, while Alpine and Sierra counties are low risk. Switch to census tract view, and it's clear there are many low risk in Sacramento/Citrus Heights away from fires and floods (downtown by the river floods). There are also pockets of low risk around San Diego and randomly around semi-populated areas.
> State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.
If you understand the insurance & re-insurance business - can you explain these three factors in a bit more depth?
Naive guesses: insurer offers a policy that agrees to rebuild a destroyed home -- so they're exposed to construction costs, if those costs rise above their projections. Unanticipated increases in construction costs increase the liability and reduce the expected profitability of each insurance policy. Increased risk of catastrophe might also increase liability of each insurance policy for homes exposed to those catastrophic risks, and also increase the risk to the whole portfolio of a catastrophe destroying many homes at once, causing many policies to come due at at the same time. A catastrophe might also do interesting things to market rates for construction costs.
Your naive guesses look to me to be on point.
Another thing to consider, at least in the case of 'Replacement Cost' (What it would cost to build a house with similar features) versus 'Actual Cash Value' (What the house was worth on the market.) In the case of 'Replacement Cost' there is the issue that any changes to code must be factored in (i.e. a house built in 1980, may have wiring/plumbing/etc that had been grandfathered in but could not be approved as a new build today.)
Increased risk of catastrophe is also a result of the root causes of massive losses from wildfires not being addressed at a government level.
https://newsroom.statefarm.com/state-farm-general-insurance-...
Seems like a solid reason to me.
Why are rebuilding costs so much higher in California than other states?
But State Farm insures a lot of areas that others already consider too risky. They could be more targeted about reducing their coverage area. If your home is in the middle of LA I don't think it's prone to wildfire risk.
This is a little misleading.
My family has State Farm, and they recently sent a letter informing us they will be inspecting our property.
My guess is they are looking for things that could increase the risk of fire or risk of losing/damage to the house during a fire and will ask us to remediate any issues they find.
This is understandable, but their current statement is likely misleading because they are likely implementing other, additional/different policies for existing home insurance policy holders.
The state passed a law that was basically, pay 0.8% tax for the rest of your life or buy private LTC care for 30 days and avoid paying the tax forever.
The insurance providers were not happy to see people joining for 1 mo and then canceling.
The Gulf South has been having a tough time with a string of catastrophic storms and flooding. Since 2005, Louisiana has been struck by 10 hurricanes. Flood policies have become so incredibly expensive that some people are simply saving money and throwing it into an account because it makes more sense than paying $8K+ to get a home insured for a year.
Don't wanna ask anybody at the company, in case they mention the price control legislation.
Perhaps that's not fair; the insurance market is such that there's never not been "price controls".
Is that Jake from State Farm?
this is just State Farm looking for concessions.