California Homeowners Insurance Explained

Insurance Lecturer — Homeowners insurance is a big market in the state of California, especially as the price of housing continues to rise throughout the state.

While homeowners insurance is not required in the state of California, it is definitely recommended for all homeowners.

Often times even though homeowners insurance is not required by the state of California, specific mortgage companies will require homeowners insurance in order to secure a mortgage loan for the home.

This protects the company’s investment in case of damage to the dwelling or the possessions inside.

Before purchasing homeowners insurance, it is important to discuss with each insurance company what the homeowners insurance covers and whether or not the homeowner will need any clauses or amendments adding to the insurance policy.

It is also important to understand the guidelines set forth by your mortgage company to ensure you are receiving adequate coverage for their standards.

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In the state of California, depending on where you live, it is important to consider both wild fire protection and earthquake insurance.

While many insurance plans will cover fire damage, you may want to verify if this includes forest fire damage, since this would be damage not directly caused by an accident occurring inside of the home.

Depending on the insurance company, you may need to consider extra forest fire protection.

Unfortunately, more often than not earthquake insurance needs to be purchased separately from a regular homeowner’s insurance policy in the state of California.

Many California insurance companies do not even offer earthquake insurance, so you may need to go to a specialty company to purchase this type of insurance.

Keep in mind that since the 1994 Northridge earthquake, new policy has been set in place that requires an insurance company offering your fire insurance to also offer you earthquake insurance.

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The most popular way to go about purchasing earthquake homeowner’s insurance in California is through the California Earthquake Authority. For those companies who offer earthquake insurance, many will simply add on a policy through CEA.

The CEA is a privately financed public entity that offers residential insurance for homeowners, renters, condo owners and mobile home owners.

Along with repairing the home after an earthquake, the policy will also cover repairing damaged possessions, getting the home up to building code again and giving an allowance for emergency living expenses.

Keep in mind when purchasing insurance in California, that in 1968 the California legislature established the California FAIR plan, which creates stability in the insurance market.

This keeps insurance companies from charging outrageous prices and also ensures that all property owners will be able to find homeowners insurance to protect their homes.

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The plan works by gathering together all property insurance companies in the state of California to ensure that property insurance will be offered to everyone.

If a homeowner has searched for homeowners insurance to no avail, then they will submit an application to the California FAIR plan agency detailing their struggle and requesting assistance.

With this, the insurance company who is best suited to help the homeowner will take them on and provide insurance.

The FAIR plan was originally set out to help those homeowners in earthquake areas, near wildfires or in urban areas.

This does not stop anyone from being eligible for the FAIR plan if they are having difficulty obtaining California homeowners insurance.