Wildfires? Hurricanes? What to Do If Finding Property Insurance Is Tough

A two-story home burns in a fire.
A home burns as the Dixie fire jumps Highway 395 south of Janesville, Calif. Ethan Swope/AP Photo

State Farm and Allstate have stopped accepting new applications for property and casualty insurance in California. Allstate quit months ago. State Farm recently announced its decision, which doesn’t affect auto insurance.

State Farm said the decision is “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.”

Wildfires have burned millions of acres in California and destroyed about 1,800 structures in recent years, according to Cal Fire.

Outside of California, homeowners in Kentucky and Louisiana are seeing a sharp increase in the cost of flood insurance — partially because floods aren’t covered under regular homeowners insurance. Instead flood insurance is mainly sold and backed by the federal government through FEMA. Homeowners in Florida have seen similar premium spikes, too, following devastating storms in the last several years.

Some states and local governments are even suing FEMA to block higher premiums. Homeowners in parts of southeast Louisiana are seeing an average increase of around 500% on their flood insurance premiums.

If you’re a homeowner in one of these states, what can you do?

Paying too much for homeowners insurance? These property insurance discounts could help lower your premium.

What Options Do Homeowners in High-Risk Areas Have?

First off, it’s important to know that homeowners insurance doesn’t always cover natural disasters and what risk looks like in your area — whether that’s earthquakes, wildfires, floods, hurricanes, hail damage and so on. Even if you have regular insurance, you may need an additional policy.

If you’re struggling to find residential insurance in your area, you still have options. The California Department of Insurance and other experts offer this advice.

  • Contact your insurer. If you’ve been notified about a nonrenewal, there’s no reason why you can’t simply contact your insurer and ask if there is anything you can do to mitigate risk and keep your coverage.
  • Look to the state. File a complaint with your state’s department of insurance if you think your nonrenewal was unfair. The names vary but look for the insurance commission or department of insurance.
  • Check with a broker. Talk with an insurance broker in your area who can look at policies from multiple carriers and might be able to direct you toward private insurers where you can get flood insurance outside of FEMA. Private insurers do carry more risk, however, because they aren’t backed by the federal government.
  • Consider surplus line insurers. Ask a broker about specialized insurance providers and surplus line insurers. These are insurers who cover uncommon, high risks typically not covered by traditional insurance companies.
  • Ask your neighbor. Talk to your neighbors about who their insurance provider is. You may come away with some new options to try.
  • Use an insurance marketplace. Simply because two major insurers exited an area, that doesn’t mean they all have. Cover the basics by simply seeing if any other major insurers are still available. Insurance marketplaces like Policygenius let you search and compare rates easily across carriers.
  • Try the FAIR plan. Find out if you have access to the FAIR (Fair Access to Insurance Requirement) plan, available in select states such as California. FAIR offers coverage for properties that can’t get traditional insurance because of high risk factors, such as wildfires, according to Gregg Barrett, CEO of WaterStreet Company — a property and casualty tech insurance company in Montana.
  • Mitigate risks. If you’re planning to move, pay attention to your new city’s rating under FEMA’s Community Rating System. This program offers flood insurance discounts to communities that actively work to reduce risk and foster comprehensive flood plain management. It also pays to check on the area’s fire protection resources. It’s easier to get affordable coverage for a place with a fire department and hydrant system than a cabin surrounded by brush deep in the woods.

Bottom line: If you’re finding it more difficult to insure your home because of where you live, explore all your options, including the FAIR plan. Do everything you can to protect what’s likely to be your greatest asset.

Robert Bruce is a senior staff writer at The Penny Hoarder covering earning, saving and managing money. He has written about personal finance for more than a decade.