San Francisco Chronicle - (Sunday)
How is the homeowner’s insurance crisis affecting the San Francisco market?
Having sufficient insurance is nonnegotiable. Given our property values and liability risks, combined with insurance requirements set by mortgage lenders, getting insurance coverage was a crucial but routine part of the purchase process until it wasn’t. State Farm’s withdrawal from California last year disrupted that routine.
Insurance denial is a real prospect, especially with remaining insurers examining properties with greater scrutiny before offering coverage. A denial can derail a purchase because there’s now a standard contract contingency for getting insurance. Because so many of San Francisco’s homes predate 1970 and may contain outdated systems and potentially hazardous materials, the denial risk is higher. Coverage decisions can now entail deep dives into a property’s permit history and may involve inspections of roofing, plumbing, and electrical systems, and in some cases, requirements to update outdated systems like knob and tube wiring, or installing emergency water shut-off systems.
To navigate this complex environment, we advise our clients to be proactive. Buyers are encouraged to obtain insurance quotes before writing offers, and sellers are advised to update their properties to pass muster to safeguard against potential coverage denials.
All home loans require insurance. Fourteen out of 20 of the most destructive fires in California history have happened during the past 9 years. Our current rain season precipitation locally is 123% of normal, which is not normal. These are challenging stats whether you’re a homeowner, renter or an insurance company.
With these recent years of catastrophic weather events, insurance companies are busier than ever processing claims and relooking at what policies should cover or not cover. The California State Insurance Commissioner sets the max rates that the insurance companies can charge or raise.
This affects the willingness for claim-swamped insurance companies to write new policies. International groups across the globe acknowledge that the catastrophic rains, winds, droughts, and storms will continue until we ween off fossil fuels worldwide. New or renewed insurance policies continue to be a day-by-day conversation for everyone in the Bay Area. It is not uncommon for a 2023 annual policy of $3,600 to jump up to $19,000 in 2024.
If your property is surrounded by trees or excessive foliage or near a body of water, pay close attention to keeping your property safe from any environmental claims.