Wildfire insurance protects your property from damage caused by wildfires.
Key Takeaways
What is Wildfire Insurance?
Having coverage for wildfires is essential for those who live in areas susceptible to this type of loss. But what exactly does that mean? Simply put, wildfire insurance is coverage for your home and personal property for losses resulting from wildfire. Fires are typically covered under a standard homeowners’ policy. So, if you have an insurance policy for your home, you most likely have coverage in the event of a wildfire.
However, you might not be able to find an insurance company willing to insure your home if you’ve had a previous wildfire loss or if you live in an area where those fires are likely to happen.
California Senate Bill 824 imposes a one-year moratorium on insurers that prevents them from canceling or non-renewing a home within certain fire perimeters. This means that for homeowners in areas where the governor previously declared a state of emergency, insurance companies cannot cancel their insurance policy for one year from the date of declaration.
But what if your home is not within one of the affected areas? Or what if it’s been over a year since the state of emergency?
Purchasing Wildfire Insurance
If your homeowners’ insurance company is not renewing your existing policy or a new homeowner is purchasing a home in an area susceptible to wildfires, you may have trouble finding a company to insure your home. Luckily, you do have some options.
The California Fair Plan exists for this very reason and can be a great choice until a standard company is willing to insure your home. A difference in conditions policy is also a great supplement to a policy through the Fair Plan.
What Does Wildfire Insurance Cover?
A standard homeowners’ policy will cover your home and any unattached structures for certain perils, which is the insurance term for “events.” The perils you are covered for will vary depending on the type of policy you have.
But most policies will typically cover you for things such as fire, lightning, and wind, among other things. Luckily, the fire peril also includes wildfires.
In addition to coverage for the structure of your home and anything that is unattached to it – an unattached garage or shed, for example – a homeowners’ policy will also usually cover your personal property, liability, medical payments, and loss of use.
Loss of use refers to any additional living expenses that you may incur due to a covered loss. An example of this would be if a lightning bolt struck your kitchen, and you were forced to order take-out until the kitchen was repaired. A standard homeowners’ policy would cover that additional expense as well as the repairs.
What Does the California Fair Plan Cover?
The California Fair Plan is an excellent alternative to a standard homeowners’ policy, but there are some key differences. The most notable difference is what perils are covered. As mentioned in the previous section, homeowners’ policies will usually include coverage for fire, lightning, wind, and other events such as hail or vandalism. The Fair Plan, however, only provides coverage for fire, smoke, and internal explosion.
This means that if you cannot get your home insurance through a standard carrier and obtain insurance through the California Fair Plan, you would not be covered for some events. You can add some additional perils to your policy but at an increased cost.
The Fair Plan policy also does not include liability or medical coverage. Liability and medical coverage can protect you if you are sued, and it is a vital part of a homeowners’ policy. Without it, you could be financially responsible if someone slips and falls on your property, for example.
So, what can you do to ensure your home is adequately covered? A difference in conditions policy can be a great supplement to the Fair Plan.
However, you might not be able to find an insurance company willing to insure your home if you’ve had a previous wildfire loss or if you live in an area where those fires are likely to happen.
California Senate Bill 824 imposes a one-year moratorium on insurers that prevents them from canceling or non-renewing a home within certain fire perimeters. This means that for homeowners in areas where the governor previously declared a state of emergency, insurance companies cannot cancel their insurance policy for one year from the date of declaration.
But what if your home is not within one of the affected areas? Or what if it’s been over a year since the state of emergency?
A Difference in Conditions Policy
While the Fair Plan is an option for homeowners’ insurance, it’s not comparable to a standard homeowners’ policy. The solution is to supplement the Fair Plan policy with a difference in conditions (DIC) policy.
A DIC policy will fill in any coverage gaps between a homeowners’ policy through the Fair Plan and a standard homeowners’ policy. In addition to providing coverage for additional perils, it also offers liability insurance with some other coverages available.
How do I Learn More?
Contact a local broker or agent to inquire about a homeowners’ policy through the CA Fair Plan and a difference in conditions policy to ensure you are adequately covered.
