Recent California wildfires have increased the cost of wildfire insurance, causing problems for homeowners trying to sell.

With rising insurance costs, Californians are reportedly having a hard time selling homes. Buyers are forced to back out of sales or lower their offers after discovering how much wildfire insurance is going to cost.

“We’re just going to get a bunch of houses sitting on the market that won’t sell,” a California realtor told the Wall Street Journal. The realtor says she sold just $4.7 million in real estate last year, a substantial drop from the $8.8 million she sold in 2018.

With increased insurance costs, home price increases may slow. Some experts say that this trend could make homes less affordable for middle-class families looking to purchase. Buyers may be forced to look elsewhere for a home if they can’t keep up with the high price of insurance.

“Putting an even higher bar on the financial requirements of homeownership means that some folks are going to get priced out,” Jordan Levine, the deputy chief economist of the California Association of Realtors, told the Journal.

Wildfire insurance rates are steadily increasing due to the growing and shifting zones of fire risk in California. These zones are changed to reflect the risk of recent California wildfires. The higher the risk, the greater the price of insurance.

In some cases, homeowners may find it difficult or impossible to find  wildfire insurance. In an attempt to limit their own losses, insurers are reportedly declining to renew policies for at-risk homeowners. In 2017 and 2018 alone, insurance companies paid over $24 billion in losses caused by California wildfires.

Although insurers may be aiming to reduce their costs, these denials may leave homeowners uninsured in the face of a tragic wildfire. Not to mention the significant impact the coverage issues have on new buyers.

In December, The New York Times reported that the California legislature issued a one-year morataorium on insurance companies canceling homeowners coverage in zipcodes ravaged by recent California wildfires. While the state barred insurers from denying home insurance policies for one year after a wildfire, the ban provides no assistance to new buyers looking for a policy.

Recent California Wildfires

In 2018, California saw its deadliest and most destructive wildfire season. Across the state, a total of 8,527 fires scorched 1.9 million acres. Deadly fires such as the Woolsey and Camp Fires claimed many lives, including 97 civilians and six firefighters. The 2018 season also resulted in the destruction of more than 22,000 buildings at a cost of over $3.5 billion.

California’s 2019 wildfire season proved to be less destructive than 2018’s, but still resulted in significant damage. Though there were some 7,860 wildfires, only about 260,000 acres were burned, far fewer than the millions of acres decimated in 2018. According to Wikipedia, the California Department of Forestry and Fire Protection, the Kincade Fire, which started in October, was the largest fire of the season, burning 77,758 acres in Sonoma County.

Much of the costs associated with the recent California wildfires (the 2019 season) focused on prevention and suppression efforts. Many utilities preemptively shut off power to customers in order to prevent electrical lines from sparking a fire.

This article is not legal advice. It is presented
for informational purposes only.