Unisured and Inadquate Coverage

Home Insurance in High-Risk Areas

The landscape of home insurance is rapidly changing, especially for communities in areas designated as high-risk for events like wildfires, floods, and severe storms. Homeowners in places like San Diego are increasingly facing unprecedented challenges: policy cancellations, non-renewal notices, and insurers withdrawing from certain markets entirely. High risk populations are often left vulnerable, at the mercy of a shrinking market, with inadequate coverage and forcing communities to be uninsured. As seen in the Palisades and Eaton, or the LA Fires, multi-generational families, often in high risk population groups are the most at risk to be left with no recovery infrastructure. IFF programs aim to bridge that gap and help those with no other options for recovery.

Inadequate Coverage and Percentage Deductibles

For those who manage to maintain coverage, the terms are often less favorable than in the past. It is not uncommon to see:

• Increased Premiums: The cost of insurance can skyrocket, making it a significant financial burden.

• Reduced Coverage: Policies may offer less comprehensive protection, leaving gaps that policyholders only discover after a disaster.

• Exclusions: Certain perils, once covered, might now be excluded from policies.

One particularly insidious change is the rise of percentage deductibles for home insurance policy. When purchasing a policy, instead of a flat fee deductible, insurance carriers are opting to provide percentage deductibles only. A percentage deductible like 5 percent or 10 percent is the average offering, and it might sound minimal. However, for high risk populations or in a high value area, this can translate to an enormous out-of-pocket expense. For a home with an insured value of $1.2 million, which is a representative value for the average San Diego home, a 5 percent deductible means the homeowner is responsible for the first $60,000 before the insurance policy covers any repairs. A 10 percent deductible would mean a staggering $120,000 out of pocket. It is critical to note that your home's percentage deductible is based on the insured value, not the current market value of the policy. This shift effectively places a greater financial burden directly on high risk populations at the very moment they are most vulnerable.

Proactive Solutions

Given this challenging environment, proactive measures are no longer optional—they are essential.

1. Understand Your Risk Profile:

   • Assess Your Property: For fire risk, understand your "defensible space" and harden your home with fire-resistant materials.

   • For flood risk, know your flood zone and consider flood mitigation measures.

   • Stay Informed: Monitor local risk assessments and community-wide mitigation efforts.

2. Review Your Policy Annually (or More Often):

   • Read the Fine Print: Do not just look at the premium. Scrutinize exclusions, new endorsements, and especially any percentage deductibles. Add any additional coverages as necessary.

   • Question Everything: If your policy is changing, ask your agent for a clear explanation of what is and what is not covered.

   • Shop Around Aggressively: Before you lock into a policy, receive 3-5 bids for the same property and coverage terms. If you receive a cancellation or non-renewal, start seeking new quotes immediately from multiple carriers, including those specializing in high-risk properties or state-sponsored programs if available in California (like the FAIR Plan, though it offers more limited coverage).

3. Document Your Home and Contents:

   • Detailed Inventory: Create a comprehensive inventory of your possessions, ideally with photos or videos. Store this securely off-site or in the cloud.

   • Property Condition: Document your home's pre-loss condition with photos. This is crucial if damage from a disaster is disputed.

IFF Individual Disaster Recovery Fund

While insurance is vital, relying solely on it is increasingly risky. Communities and individuals should consider creating additional layers of protection. One powerful solution is the establishment of an IFF Individual Disaster Recovery Fund. Especially in areas where wildfire insurance in unavailable or unaffordable, the recovery fund is an excellent tool to safe effectively and plan for all future contingencies. All funds placed into the recovery vehicle are available to the affected family immediately following disaster impact. If the fund owner is unaffected, but a family member or future generation requires assistance, the funds may be used to assist the affected community members.

Community members may collectively contribute to a dedicated fund for their specific neighborhood, providing immediate, flexible financial support to your families affected by disaster. The fund is available in perpetuity to all future generations of the establishing member; ensuring long term financial support is available when you need it most.

The IFF Individual Disaster Recovery Fund is not a replacement for insurance or emergency funds.

Resources for Recovery

If your community is affected by a disaster, remember you are not alone. Reach out to the IFF Volunteer Emergency Response Teams for critical support:

• Emergency Disaster Relief Information: Access immediate guidance and resources.

• Step-by-Step Long-Term Recovery Education: Navigate the complex journey of rebuilding with clear, actionable advice.

• Local Resources: Connect with essential local services and organizations necessary to heal and rebuild.

These tips are intended for educational purposes only. No legal advice should be inferred from these materials.

A Changing Climate