What happened to home insurance rates?
If you haven’t been hiding under a rock (or living in an underground bunker), you probably know that finding affordable home insurance in California is becoming as tricky as finding a safe parking spot in San Francisco! For some home buyers, snagging a policy—regardless of price—has become a game of Mission Impossible (cue the suspenseful music and dramatic hand gestures).
According to the California Department of Insurance, a staggering 7% of home sales are falling out of escrow due to insurance costs being as high as a Taylor Swift concert ticket! And remember, if you’re buying a home, you won’t get a loan without that precious insurance policy—it’s becoming like purchasing a pricey membership to an exclusive club!
Even for the lucky folks who already own homes, life’s not all sunshine and rainbows. Many homeowners are getting blindsided by insurance companies that treat loyalty like a Tinder date that ghosted them—poof! One minute you’re on cloud nine, and the next, you receive a letter saying ‘hasta la vista’ along with your insurance coverage.
If you’re young enough to still have a mortgage and your insurance carrier dumped you, then your lender will graciously insist you take on their insurance policy, which is priced about twice to three times higher than your old policy—because banks really enjoy caring for clients, like a reverse fairy godmother that swaps your expensive carriage for a pumpkin.
How did this all go down?
So, how did we end up in this sticky situation? For years, home insurance companies were stuck in the dark ages, using historical data to set their premiums instead of embracing their inner math nerd and deploying fancy computer models to predict future costs. This is like trying to forecast tomorrow’s weather based on last year’s pool party. Given California’s dramatic flair for fires and floods in certain regions, these premiums haven’t been able to keep up with the disaster movie unfolding around them—cue the explosions!
Even with all these known risks, insurance companies can’t just wave their magic wands and raise rates like they’re at a karaoke night belting out “I Will Survive.” Back in 1988, California passed Proposition 103, which means insurance companies have to play nice and get permission from the California Department of Insurance for rate hikes over 7%. Getting that approval is like trying to convince a cat to take a bath—good luck with that!
But here’s the scoop: California’s biggest insurance player, State Farm, is asking for a jaw-dropping 30% rate increase for homeowners, a colossal 52% for renters, and a 36% hike for condo owners. It’s as if they suddenly decided that everyone could use a little more financial excitement in their lives! They’d already received a 20% bump for homeowners and condos last December, which is like saying, “Sure, have another bowl of cereal…with gold flakes!”
Then we have the California FAIR Plan. It’s coverage limits are capped at $3 million and this plan is also not shy about cranking up costs; in 2023, they raised rates for policyholders by an average of 15.7%. And guess what? It doesn’t cover basic needs like theft, falling objects, or even personal liability.
To mitigate their risk, insurance companies have transformed into cherry-picking ninjas, slicing and dicing their way through home policies like a Benihana chef! They’ve got a list of reasons longer than a CVS receipt for why they won’t insure homes. Here’s the rundown:
- Galvanized plumbing? Forget it! This stuff is basically a ticking time bomb ready to explode with the enthusiasm of a toddler on a sugar high. If you want to charm those insurance carriers, stick with copper, PVC, or PEX—because who doesn’t want their plumbing to keep on flowing and not start a water park?!
- Wood shake roofs? No thanks! Unless they’re Class A Fire Rated, under 10 years old, and come with a recent inspection report that makes them look brand new. Even roofs made of acceptable materials can get rejected if they resemble mt daughters rooms after a sleepover.
- Knob & tube wiring? Or aluminum wiring? Sorry, you must be on the wrong guest list! This wiring is as outdated as dial-up Internet and about as useful as a chocolate teapot.
- Ineligible electrical panel types? If you’ve got Federal Pacific Stab-Lok, Zinsco, Challenger, or Pushmatic panels, you might as well tape a “Danger: Explosive Material” sign in your living room! These ancient relics are more likely to burn your toast than provide any real electric service!
- Trees overhanging your home? Any height is an issue. Talk about a catch 22. Seriously, if your yard features majestic oaks or redwoods, your City Government might throw a fit if you even think about trimming them back, but your insurance might be cancelled if you don’t!
- Excessive clutter in your yard? If your yard looks like it just hosted the wildest kegger of the century with clutter everywhere, good luck getting or keeping insurance! And you might wonder how they figure this out. Spoiler alert: they’ve traded in their magnifying glasses for drones—yes, they’re watching you from above! And maybe even from below, but that’s just a rumor… for now.
- Location, location, location! It’s always been important, but some hot spots are practically on the insurance “no-fly” list these days. High fire zones? More like high-stress zones for coverage! Even if you’ve taken all the right fire abatement measures, if you’re in a fire zone, you might be considered toast—charred and crispy. If you’re curious about specific areas and homes with higher wildfire risks that could lead to more expensive—or as likely, impossible-to-find—home insurance, check out the following link (searchable by address): www.defensibleapp.com.
Now, let’s talk upgrades! The items that could make securing insurance easier (like a new roof, new wiring, new electrical panel, new plumbing, etc.) could easily add up to over $100,000 in upgrades.
For a retired person who bought their ranch house in 1950 for $16,000, these costs are like asking them to hand over their entire life savings for a magic bean because they have a perfectly function home! Rising insurance premiums might just need a Prop 13 solution for our golden years folks in California!
The takeaway
The big takeaway? Your insurance rates will likely continue to climb faster than gas prices in California. If you own a home, for heaven’s sake, do NOT let your insurance lapse! Many carriers will use that as an excuse to drop you faster than a hot potato—and no one wants to find themselves caught without coverage! If you’re looking to buy a home, start checking out insurance for your desired region early in the process—you might discover that insurance rates are as high as a giraffe on stilts or, dare I say, impossible to obtain. Ask about higher deductibles to save a few bucks plus try adding a security system to your home. This should help reduce the premium and prevent your in-laws from showing up announced.
Remember, if you’re getting a mortgage on that dream home, the lender won’t hand over the cash until you have an insurance policy for the property. Don’t join the ranks of the 7% who find themselves in hot water—unless, of course, you have a great floatie!
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About San Carlos Life
Mark Martinho and Vivienne Kelvin are the hosts of San Carlos Life and have been residents of San Carlos for years. While running San Carlos Life together with an awesome team, Mark and Viv are also in the business of real estate. They are co-owners of Vabrato Real Estate, a luxury real estate brokerage serving the City of Good Living, and the whole of San Mateo and Santa Clara counties.
With over 30 years of combined experience in the business and 95% of their clients coming in from referrals, Mark and Viv take great pride and joy in exceeding your expectations.
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