Coto de Caza home ineligible for homeowners policy.

Posted by: CotoInsuranceTr

Coto de Caza home ineligible for homeowners policy. - 04/07/19 06:46 PM

As buyers, we are considering accepting a counter offer on a 2MM+ home in Coto de Caza.

The home is at the end of a cul-de-sac and backs to open space. We've been struggling to secure a quote for homeowners insurance as carriers are classifying the home as ineligible due to wildfire danger. Over the last week, we've been denied by over 20 different carriers. They also denied adding supplemental insurance on top of the California FAIR plan, which only covers 1.5MM of structure.

I have a limited understanding of the insurance business, but I have heard that it's not unusual for insurance companies to "tighten up" after a bad wildfire season, and then soften again a few years down the road. However, all of the insurance agents I've been speaking with say that they've never seen it this bad, and some are speculating that it may only get worse.

We are still waiting to hear back from a few non-admitted carriers but the agents suspect their quotes will exceed $20,000/yr.

Does anyone on this sub have experience with this issue?

What is your opinion on this...do you think this issue will get worse as the years go on? Is it going to drastically affect home prices? I am afraid that even if I do find an insurance option for this home, I will struggle to sell the home in the future due to challenges securing a homeowners policy.

Are there any insurance options that I'm missing? I've reached out to 4 different agencies and USAA. Combined, it makes up 25 different carriers which have denied coverage.
Posted by: Bigtoe

Re: Coto de Caza home ineligible for homeowners policy. - 04/08/19 06:00 AM

Have you tried Lloyds or aig? They cover non insurable flood properties here but their price tags are high. 20k is not that high considering the risks.

As for the 1.5m structure coverage, don't forget to subtract out the land value from the coverage. You don't need a policy that covers the purchase price, just the structure.
Posted by: Long Walk

Re: Coto de Caza home ineligible for homeowners policy. - 04/08/19 07:18 AM

Florida went through something like this years ago for floods, generally, and sink holes particularly in my market area north of Tampa. In those days, the state Insurance Commission had created an insurer of last resort to insure what other firms would not; an industry grew up around that insurer that would accept pools of policies from that insurer. The mechanics of it beyond that level of detail are beyond me.

I tell you this because California's Insurance Commission, however it may be constituted or organized, would be the place to start to find those insurers. If there is no state-sponsored insurer of last resort, then you run the very real risk of having to replace the policy if the carrier cancels it. If you can't find a replacement, your lender will sell you a force-placed insurance policy. The last one of those I knew about was in 2012 and the premium was about triple that of a standard policy.

For a home purchase of this magnitude, prudence says that you are right to dig into the insurance, but also to make sure you are able to insure the property in later years.
Posted by: CotoInsuranceTr

Re: Coto de Caza home ineligible for homeowners policy. - 04/08/19 09:13 AM

[quote=Bigtoe]Have you tried Lloyds or aig? They cover non insurable flood properties here but their price tags are high. 20k is not that high considering the risks.

As for the 1.5m structure coverage, don't forget to subtract out the land value from the coverage. You don't need a policy that covers the purchase price, just the structure.[/quote]

I've tried Lloyd's and AIG. Both said no.

I agree that it may not cost 1.5MM to rebuild the structure. However, the FAIR plan leaves me exposed to other issues like water damage. It wouldn't cover the contents of the home either. None of the agencies/carriers we've spoken to are willing to add supplemental coverage on top of the FAIR plan.
Posted by: Long Walk

Re: Coto de Caza home ineligible for homeowners policy. - 04/08/19 11:06 AM

Your initial post covered the insurer of last resort in CA. I missed that on my reading and post. Sorry about that.

I went through your posts again and looked at the FAIR plan site. Have you called anyone at FAIR to see what they recommend? Based on what/where you are looking to buy, you can't be the only one experiencing this problem. This problem must be epidemic in southern California.

Just as a what-if: has this property had a wildfire claim for past fires?

Another what-if: have you made homeowner insurance claims in the last few years? As you likely know, the insurance industry keeps a kind of risk profile database on insurance applicants called the CLUE database.
Posted by: CotoInsuranceTr

Re: Coto de Caza home ineligible for homeowners policy. - 04/08/19 11:45 AM

I haven't made any claims. I'm not sure if the property has had any for wildfire...is there a way to check?

Lloyd's just came back with a reasonable price and said they'd do it. They originally denied it.

Encompass came back as well, pending an inspection.

This is after about a week of effort to get insured and only after the agents went back to negotiate after being denied.

This makes me really nervous about moving forward. Someone really has to LOVE our home to put this amount of effort in to getting it insured.
Posted by: Bigtoe

Re: Coto de Caza home ineligible for homeowners policy. - 04/09/19 06:02 AM

Have the home owner obtain a CLUE report for you. It outlines the insurance claims on the property.