The home insurance market in California has been in turmoil in recent years, with rising costs and more frequent natural disasters leading to steep rate hikes and policy cancellations for many homeowners. But relief may be on the way, with the state’s largest insurance reforms in decades set to take effect by the end of 2024. Here’s what Coronado homeowners and homebuyers need to know about navigating the insurance crisis and upcoming changes.
The Perfect Storm: What’s Driving California’s Home Insurance Woes
A confluence of factors have upended the home insurance market in the Golden State.
- Escalating Wildfire Risk: Massive, destructive wildfires have become an annual occurrence, with insured losses in the tens of billions in recent years. While Coronado has been spared the worst, much of California is now seen as high-risk.
- More Frequent Disasters: It’s not just wildfire – hurricanes, floods, and heat waves are battering the whole country more often due to climate change. Even coastal areas like Coronado face mounting risks from sea level rise and intensifying storms.
- Soaring Costs: Skyrocketing construction costs and home values mean higher replacement costs that insurers must pay out after a disaster.
Squeezed by mounting losses, insurers have responded by jacking up premiums, dropping long-time customers, and fleeing the state altogether in some cases. Over 400,000 Californians have been forced into the pricey, bare-bones FAIR Plan, the “insurer of last resort.”
Prop 103 Reforms: Bringing Insurers Back to California?
But the state is fighting back. Sweeping reforms to Prop 103, California’s key insurance law, aim to stabilize the market and lure insurers back while still protecting consumers.
- Lifting the Lid on Rate Hikes: Insurers will have more freedom to set market-based rates, rather than being constrained by Prop 103’s strict caps. This could mean higher premiums at first, but more stability and competition in the long run.
- 21st Century Risk Modeling: Insurers can finally use modern catastrophe models to assess risk, instead of relying only on outdated historical data. This will allow them to better price and underwrite policies.
- Rewarding Risk Reduction: In exchange, insurers must commit to writing more policies in wildfire-prone areas and offer discounts for homes that meet fire-hardening standards. This will incentivize homeowners to invest in mitigation.
The Prop 103 reforms, set to take effect by December 2024, represent a grand bargain. The top real estate agents in Coronado will be watching closely to see if they deliver the promised stability for California’s beleaguered insurance market.
Buying or Selling a Home? How to Avoid an Insurance Headache
Even without the Prop 103 reforms, there are steps you can take now to smooth the insurance process, especially when buying or selling a higher-risk home.
- For Sellers: Get a pre-approval or pre-qualification letter from your insurer. This assures buyers that the home is insurable. Your Coronado listing agent can use this as a selling point.
- For Buyers: Don’t wait until closing to line up insurance. Start shopping for a policy as soon as your offer is accepted. In a tough market, this can take time. Lean on your Coronado Realtor for local recommendations.
- Luxury Properties: High-end homes come with added complexity. Work with an insurance agent who knows the Coronado luxury real estate market inside and out and can ensure your assets are fully protected.
New Builds & Renovations: Building or upgrading a home? Go beyond code requirements for fire-hardening and document everything. You may be rewarded with lower premiums.
The Bottom Line: Stay Informed and Work with the Best
California’s home insurance market is complex and fast-changing. Whether you’re buying, selling, or staying put in Coronado, it pays to stay on top of the latest reforms and work with experienced professionals who know the local market.
Whitney Benzian and team are top real estate agents in Coronado and coastal San Diego. With unmatched local expertise and a track record of success with luxury properties, they can guide you through any transaction. Check out our latest Coronado real estate market reports and contact us today to start your journey.
Questions? Ask Your Coronado Real Estate Experts
As always, we are happy to help connect you to a great financial advisor, real estate lawyer, or any other industry pro you need. As the top real estate agent in Coronado, I and my team are your real estate resource. If you have a question, or when the time comes to buy or sell, please feel free to contact us.