Could your household absorb a total home loss like is happening in Ca because insurance cos were permitted to suddenly drop fire coverage?

[TippyThomas]

I don't live in an area that has natural disasters as often as I see in the news. The biggest threat would be tornadoes. I could absorb the loss of the home and take money out of savings and investments to rebuild. It would suck quite a bit of course, and I'd hate that I had to do it, but I could do it if I had to.

 

[tvguy]

They weren’t just dropped from their provider out of the blue. They weren’t renewed when the policy was up. That is very different.

Insurance carriers take calculated risk with what they will insure and for how much. They look at the likelihood of a loss, what they will have to charge to cover the anticipated losses and still make a profit. They have determined that California has a very high risk of losses and were not allowed to raise rates high enough to cover everything and keep their profit margins. Therefore they decided to stop covering customers when their policy was up.

Correct. People made a choice not to buy a new policy through another insurance provider when their coverage was canceled. Worst case scenario, you buy it through the FAIR program. But coverage in California is ALWAYS available.
https://www.insurance.ca.gov/01-consumers/200-wrr/California-FAIR-Plan.cfm

 

[dvcgirl67]

Yeah, I'd never own a home that wasn't insured, but we would be able to handle it at this point in our lives. We own the land, and could likely get 300K for that alone, so we'd take about a 500K hit. It would suck, but it wouldn't affect our lives all that much at this point as our home is about 16% of our net worth. But we're also not young....late 50s...close to retirement. It would have been a very different story twenty years ago.

 

[cvjw]

We could rebuild without insurance if we had to.

Insurance companies pulled out of California because they had to. California wouldn’t let them raise rates, like they can do in other states to stay solvent. You can’t make a company stay and lose money - another terrible short sighted policy put into place by California.

 

[georgina]

I was very surprised when we moved here 4 years ago that the homeowners insurance is only for about half the amount it would sell for. It was explained to me that is because the cost to physically rebuild is that much less than the selling prices.

 

[sam_gordon]

Let's not kid ourselves. Insurance companies are bring in multiple (like 80+) Billions in profits. Yes, they're doing the math to figure out how much they bring in vs how much they payout, but they COULD eat into the profits if they really wanted to.

Sorry, I won't feel sorry that "they couldn't raise rates as much as they'd like".
https://iltla.com/?pg=Blog&blAction=showEntry&blogEntry=109107

Yes, they are a business and can decide where they're going to do business, but I'm not going to cry for them because they couldn't charge enough to keep their profit numbers up.

 

[bcla]

Let's not kid ourselves. Insurance companies are bring in multiple (like 80+) Billions in profits. Yes, they're doing the math to figure out how much they bring in vs how much they payout, but they COULD eat into the profits if they really wanted to.

Sorry, I won't feel sorry that "they couldn't raise rates as much as they'd like".
https://iltla.com/?pg=Blog&blAction=showEntry&blogEntry=109107

Yes, they are a business and can decide where they're going to do business, but I'm not going to cry for them because they couldn't charge enough to keep their profit numbers up.

Depends on the company. Three of the biggest four home insurers (State Farm, CSAA, and Liberty Mutual) in California are mutual benefit companies where profits go to reserves and to dividends back to the policy holders. But then again they might have taken higher risks and/or had lower rates. State Farm has suspended issuing new homeowners policies in California.

 

[sam_gordon]

Depends on the company. Three of the biggest four home insurers (State Farm, CSAA, and Liberty Mutual) in California are mutual benefit companies where profits go to reserves and to dividends back to the policy holders. But then again they might have taken higher risks and/or had lower rates. State Farm has suspended issuing new homeowners policies in California.

So? All I'm saying is I'm not feeling sorry for them if they can't keep up their profit margin.

 

[_19disnA]

Seems like a variation of what you asked recently about insurance in another similar thread.

Everyone's financial situation is different so not sure how knowing what others can/can't afford has anything to do with the recent fires in CA.



I don't live in CA, but if you currently had valid insurance (premiums paid on-time), I would want to know more of the details from anyone claiming their insurance policy was cancelled AFTER they submitted a claim due to the recent fires (and told by the insurance company they refuse to pay any claim). Florida also has a lot higher claims from natural disasters in the past few years and some insurance companies have stopped offering new policies.

Someone making wild claims on social media would need to provide us more details before we can jump to any conclusions. If someone was informed in the past that their insurance company was no longer providing coverage, it was their responsibility to seek out other insurance.

 

[bcla]

I was very surprised when we moved here 4 years ago that the homeowners insurance is only for about half the amount it would sell for. It was explained to me that is because the cost to physically rebuild is that much less than the selling prices.

It’s kind of tricky doing the math on that. The cost to rebuild can often go up after a large natural disaster where there’s a lot of demand for construction services. Many policies have “guaranteed replacement” that will cover reasonable replacement costs, even if more than the policy limits. And then after a large natural disaster the value of land might go down because of a glut of empty properties and many owners looking to move.

That being said, I distinctly remember the Oakland/Berkeley Hills fire of 1991. That was instrumental in all sorts of fire issues in California, including a move away from wood shake roofing and creating defensible space. But that was a desirable place to live and rebuilding happened in force. Another issue was people rebuilding and wanting way more house than was destroyed. I don’t the same quite happened in Paradise, California. I heard a lot of people decided not to rebuild and might have cashed out. I don’t believe it helped with property values either.

 

[bcla]

So? All I'm saying is I'm not feeling sorry for them if they can't keep up their profit margin.

With mutual benefit, any profits are supposed to go back to the policyholders in the form of reduced rates. So less profit means the policyholders lose out.

 

[sam_gordon]

With mutual benefit, any profits are supposed to go back to the policyholders in the form of reduced rates. So less profit means the policyholders lose out.

Which is it? Insurance companies should be able to increase premiums however much they want to keep profits up or the profits reduce the premium?

 

[bcla]

Which is it? Insurance companies should be able to increase premiums however much they want to keep profits up or the profits reduce the premium?

I'm specifically addressing that mutual benefit insurance companies aren't really looking at profits where they benefit shareholders or owners, other than that technically the policyholders are the owners. They still need to mitigate risk, and there are still people who make a living working for these companies and selling their policies. And even a mutual benefit company like State Farm is paying for pitchmen.

 

[barkley]

That being said, I distinctly remember the Oakland/Berkeley Hills fire of 1991.

newly married dh and I were living in an apartment and could see out our sliding glass doors the smoke rolling over the hills of the bay area while watching the coverage on ktvu news. we also watched the coverage of the evacuation centers from that fire and took mental note of the insurance agents that were ON SITE, checkbooks in hand writing out temporary housing/necessity checks for their insured customers. we had just begun house hunting for our first home a few weeks earlier-34 years later we have the same homeowners insurance company we chose watching that news coverage. our decisions were based on the actions of the insurance company employees-which were stellar.

 

[MillauFr]

Where we live in Seattle the vast majority of the value is in the land. People pay $10m an acre for property. That is why we have tiny lots. Very few people can afford a large lot. People are slicing up their lots smaller and smaller. The 100 year old houses don't have much value.

 

[OrangeBirdGirl]

Now that I'm thinking about these people that self insure, I had another thought. What about liability insurance? We have insurance on our vehicles and home and also an umbrella policy. We live in a 4 season climate. What happens if there is ice and the delivery driver slips and falls on our walkway? I'm assuming initially the company, UPS/Fedex/Amazon (if an actual employee vs contracted worker) covers their medical bills. But I'm assuming the company's insurance is going to come back to us for the liability for not having a safe path for them to access our front door. There is a good possibility depending on the severity of a fall, the driver could become paralyzed. That would wipe out everything most people have. As I'm assuming the folks that have millions upon millions are not choosing to self insure. I'm thinking it's the average upper middle class family whose home is paid off and looking to save a little bit each year.

On a side note, we do immediately do snow/ice removal for the drivers, keep lights on when they deliver at night, etc. But you never know what could happen. In a sue happy world, they could just trip without any obstructions and likely there is a way we were negligent.

 

[bcla]

Now that I'm thinking about these people that self insure, I had another thought. What about liability insurance? We have insurance on our vehicles and home and also an umbrella policy. We live in a 4 season climate. What happens if there is ice and the delivery driver slips and falls on our walkway? I'm assuming initially the company, UPS/Fedex/Amazon (if an actual employee vs contracted worker) covers their medical bills. But I'm assuming the company's insurance is going to come back to us for the liability for not having a safe path for them to access our front door. There is a good possibility depending on the severity of a fall, the driver could become paralyzed. That would wipe out everything most people have. As I'm assuming the folks that have millions upon millions are not choosing to self insure. I'm thinking it's the average upper middle class family whose home is paid off and looking to save a little bit each year.

On a side note, we do immediately do snow/ice removal for the drivers, keep lights on when they deliver at night, etc. But you never know what could happen. In a sue happy world, they could just trip without any obstructions and likely there is a way we were negligent.

I'm sure it's possible to get liability and/or theft coverage without coverage on the home per se. Probably similar to renters insurance.

 

[georgina]

It’s kind of tricky doing the math on that. The cost to rebuild can often go up after a large natural disaster where there’s a lot of demand for construction services. Many policies have “guaranteed replacement” that will cover reasonable replacement costs, even if more than the policy limits. And then after a large natural disaster the value of land might go down because of a glut of empty properties and many owners looking to move.

That being said, I distinctly remember the Oakland/Berkeley Hills fire of 1991. That was instrumental in all sorts of fire issues in California, including a move away from wood shake roofing and creating defensible space. But that was a desirable place to live and rebuilding happened in force. Another issue was people rebuilding and wanting way more house than was destroyed. I don’t the same quite happened in Paradise, California. I heard a lot of people decided not to rebuild and might have cashed out. I don’t believe it helped with property values either.

I will have to trust the insurance company on the value because every quote I got was about the same level of insurance. Area is not prone to natural disasters, townhouse was built in 1998, walls are thick enough between units that I never hear any noise from either side. I can’t imagine any piece of land this close to Washington DC going down in value. Before we moved here I was used to single family homes that the insurance replacement value was somewhat higher than the current value.

 

[barkley]

Now that I'm thinking about these people that self insure, I had another thought. What about liability insurance? We have insurance on our vehicles and home and also an umbrella policy. We live in a 4 season climate. What happens if there is ice and the delivery driver slips and falls on our walkway? I'm assuming initially the company, UPS/Fedex/Amazon (if an actual employee vs contracted worker) covers their medical bills. But I'm assuming the company's insurance is going to come back to us for the liability for not having a safe path for them to access our front door. There is a good possibility depending on the severity of a fall, the driver could become paralyzed. That would wipe out everything most people have. As I'm assuming the folks that have millions upon millions are not choosing to self insure. I'm thinking it's the average upper middle class family whose home is paid off and looking to save a little bit each year.

On a side note, we do immediately do snow/ice removal for the drivers, keep lights on when they deliver at night, etc. But you never know what could happen. In a sue happy world, they could just trip without any obstructions and likely there is a way we were negligent.

my side note-2 words 'heated mats'. they are awesome. we have them from the edge of our driveway up the steps of the house. visitors/fed ex/ups...park where they can step directly on to it and avoid the ice and snow entirely (caution-they do attract outdoor kitty cats). best couple of thousand dollars we've spent (dh broke a couple of ribs slipping once)