Realtor Insights: Out-surance
from Martin Kojnok, neighbor and Realtor® in Maxwell Park
In recent years, insurance companies have decided to step back from the California market.
Big, recognizable names have either stopped issuing policies in certain areas or stopped renewing existing policies citing more frequent natural disasters, higher costs from lawsuits, navigating through regulatory hoops, etc. This move has left homeowners living in areas prone to wildfires, earthquakes, and other major events in a lurch. Even those with comparable lower risk - like us in Maxwell Park - are being affected. With fewer options available, finding affordable coverage has become a challenge for home buyers and sellers, but it's now also directly affecting homeowners simply wishing to stay put.
Most insurance brokers and carriers will tell you, if you have home insurance - and you haven’t received a "non-renewal” letter - it’s best to stick with what you have at the moment. Just about everyone’s insurance is either already more expensive or is about to be. If you have received a non-renewal letter, it’s important to understand the types of options you have available to you. The main options being: admitted and non-admitted carriers, and the California Fair Plan.
Admitted and non-admitted home insurance companies represent two distinct categories within the insurance industry. Admitted insurance companies, like Allstate, State Farm, and Farmers, are those that have been licensed and approved by the state's insurance department to sell insurance policies within the state. They are subject to stringent regulations governing their financial practices, policy terms, and rates. This oversight is intended to protect policyholders by ensuring that the insurer remains financially solvent and capable of fulfilling its obligations while maintaining relative affordability.
On the other hand, non-admitted insurance companies, like Lloyd's of London for example, operate without state regulation and backing. They typically cater to high-risk markets or provide coverage for risks that admitted insurers are unwilling to cover. While this flexibility can enable them to provide coverage for unique situations, it also means that policyholders may have fewer protections and recourse in the event of insurer insolvency or disputes. If there’s a major disaster and the non-admitted carrier doesn’t have the funds to address all of the claims, the state will not step in to make up the difference to fulfill the company’s obligations. Policyholders should be aware that non-admitted insurance policies may come with higher premiums and less comprehensive coverage compared to admitted policies.
In a nutshell, admitted carriers have become much more stringent of what and where they will insure - if they even do. Non-admitted carriers have been stepping in to fill the gap however are often more costly, may not have the same degree of coverage, and may not have the solvency or state’s guarantee in the event of a catastrophe.
When neither admitted nor non-admitted insurers can provide coverage, homeowners can turn to the California Fair Plan as a last resort. This plan, established in 1968, offers basic property insurance to those unable to obtain coverage through traditional means. While it provides essential protection, it comes with limitations. Coverage is often more basic than what you'd find with a typical insurance policy, and it doesn't include liability or coverage for personal property. Additionally, premiums are higher than those for traditional insurance policies, too. Despite these drawbacks, the California Fair Plan serves as a vital safety net for homeowners facing challenges in vulnerable regions, ensuring that they have some level of protection against loss or damage to their homes.
Insurance is an essential part of home-ownership. As the landscape changes, it’s important to continue to keep track of our options. The unfortunate news is the industry is becoming more stringent and the cost of insurance is going up - in some areas, considerably. In the event you receive a non-renewal letter from your carrier, talk to your insurance representative and be sure to ask them about your options regarding admitted and non-admitted carrier policies as well as the California Fair Plan to see what’s right for you.
Dwell well, friends, and always feel free to reach out with any home or home sale questions.
Martin Kojnok
CORCORAN ICON PROPERTIES
MBA | REALTOR® | DRE 01941661
martin@martinkojnok.com m: 510.593.3370 www.martinkojnok.com
