A Guide to Homeowners/Wildfire Insurance

By Bob Walsmith Jr.
2022 President
Santa Barbara Association of Realtors

Ever since the Thomas fire and debris flow back in 2017-2018 the topic of homeowners insurance in the Santa Barbara/Montecito area has been a very big issue for people wanting to get adequate insurance for their home. “Is my home in a high fire danger area” and/or “Can I even get insurance on a new home that I am interested in” are just a couple of the many questions that are being asked by potential homeowners in the area.

There is no simple answer, but there are some helpful ideas that can make the process a little less daunting.

First thing to do for a potential homeowner is to contact their local trusted Realtor® anytime they identify a home that they are interested in. That is because the Realtor® can contact local insurance carriers to determine the type and cost of insurance that might be available based on the location of the home and other important information.

The last thing a buyer wants to find out after they fall in love with a property is that the insurance will run them $30,000 or more a year. It is better to find this out before rather than later.

This is important not only for homes located in the local foothills and mountains, but even down in town. People are amazed when a home that they are interested in lies in a high fire danger even though it doesn’t seem like it would be hazardous. Homes on a street can vary in type and price, depending on various factors such a slope, vegetation, etc.

That’s why regardless of the location of the home in our area, the price and type of insurance should be the first thing that is done after interest in a home is determined.

The next step is for the insurance carrier to determine what type of policy is right for the home.

Homeowners insurance is guaranteed by law in California, regardless of a home’s location, etc. However, the cost of the insurance and the coverage available can vary widely.

There are three basic types of companies that provide insurance in California. The first is through an ‘admitted’ company. These are companies such as State Farm, Farmers, etc. that most people are very familiar with. These companies are highly regulated by the state of California and are mandated what they can and cannot charge with regards to a certain policy. These companies also abide by certain standards and are constantly assessed for their ability to pay out on potential claims. Many lenders will require insurance to meet minimum rating standards and working with an admitted company can assure that those standards are met. Each companies’ ratings are public, so they can be searched easily by the consumer. California regulates that one must attempt to obtain coverage from three admitted carriers before they are able to obtain coverage from any of the following carriers.

Sometimes, when an admitted carrier is unable to take a risk due to fire risk, you may need to look into insurance with the California FAIR Plan. The California FAIR Plan was established as “Fire Only” insurance specifically intended for homes that admitted insurers will not take. It was created as a stopgap to ensure that all homes in the state can obtain fire insurance. It is important to note that California FAIR Plan is not a complete package on its own, it needs to be paired with a Difference in Condition (DIC) or Companion policy to cover the other losses that homeowners may be faced with.

Lastly, you may find that the above two are not always viable options on certain homes. When this happens, you can often obtain coverage by working with a “non-admitted” or “Surplus Lines” company. These companies often specialize in certain types of unusual risks that are considered undesirable by most insurers. Non-admitted companies are not regulated by the state and must be considered as a last resort. Before a non-admitted company can consider taking on a policy, they must obtain a signed form proving that the home was denied by three or more admitted carriers. Non-admitted insurers are not regulated by the Department of Insurance as admitted insurers, so they can often be more expensive, they also can withdraw from the state any time, refusing to renew based on their risk tolerance levels.

Is this a lot of information? Absolutely! That is why you should find a trusted insurance agent who can help guide you through the insurance process, can find creative solutions, when need be, and can support you, your local trusted Realtor, and your lender through your home-buying process.

Bob Walsmith Jr. is a native to Southern California and a Realtor® with Berkshire Hathaway HomeServices California Properties in Santa Barbara. During his work with the Santa Barbara Association of Realtors, Bob has served on the CORE Committee, Education Committee, been Chair of the Budget & Finance Committee, and the Multiple Listing Service Committee. He also is on the Board of Directors of the Alpha Resource Center of Santa Barbara. Bob lives in Goleta with his beautiful wife Julie. When not working, Bob enjoys playing golf, fine wine, fine dining, and walking our beautiful coastline. Bob can be reached at 805.720.5362 and/or bob@bobwalsmithjr.com

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