Is Wildfire Insurance Expensive?

Hazard Insurance for Homeowners in California
February 11, 2022
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Is Wildfire Insurance Expensive?

Wildfires present significant risks to homeowners in fire-prone areas. In states like California, Colorado, and Oregon, homeowners need to take steps to protect themselves and their homes against wildfires to avoid significant financial damages.

Homeowners insurance, renters insurance, and condo insurance can protect your property from damages caused by wildfires. But depending on where you live, it can be difficult to find affordable coverage, and in some cases, you may not be able to find coverage at all.

Here’s what you need to know about wildfire insurance, including what it covers and how much it costs.

What is Wildfire Insurance?

Homeowners insurance, renters insurance, and condo insurance all typically include coverages that protect homeowners and renters against damages caused by wildfires.

These coverages include:

  • Dwelling coverage: Dwelling coverage protects your home’s structure against damages caused by named perils, which typically include fires and wildfires. If a wildfire destroys your home, dwelling coverage will pay to repair or rebuild your home up to your coverage limit.
  • Other structures coverage: Other structures is similar to dwelling coverage, but instead of covering your home’s primary structure, it covers detached structures like detached garages, patios, fences, etc.
  • Personal property coverage: Personal property coverage helps to replace your personal belongings if they are destroyed by a covered peril, including wildfires. You can increase your personal property coverage limit as needed to ensure all of your belongings are covered.
  • Loss of use coverage: Loss of use coverage, also called additional living expenses (ALE) coverage, helps pay for your temporary living expenses if a fire forces you to temporarily evacuate your home.

Renters insurance and condo insurance may not cover damages to your home’s structure as this should typically be covered by your landlord’s insurance policy or your condo association’s policy. However, these policies will still cover your personal belongings and your temporary living expenses if you are forced to vacate your home.

Is Wildfire Insurance Expensive?

Wildfire insurance prices can vary significantly depending on where you live. Per the Insurance Information Institute (III), the average premium for homeowners and renters insurance in 2018 was $1,249.

While this is relatively affordable for many homeowners, the annual cost of homeowners insurance for residents in fire-prone areas can be much higher. In certain areas of California, for example, fire insurance can be as much as tens of thousands of dollars per year.

As wildfires become more frequent and more severe, insurance rates in fire-prone areas are continuing to increase, leaving many homeowners unable to adequately protect their homes.

What Factors Impact Wildfire Insurance Rates?

There are several factors that can impact your fire insurance rates, including:

  • Location
  • Your home’s replacement cost value (RCV)
  • Coverages and coverage limits
  • Claims history
  • Endorsements
  • Home age
  • Home construction
  • Safety and fire-prevention features

When it comes to fire insurance, in particular, your location is often going to be the primary determining factor when insurers evaluate your risk. This means that those living in high-risk areas are likely going to face much higher fire insurance rates.

Wildfire Insurance in High-Risk Areas

Most lenders require homeowners to have fire insurance, making it a necessity for anyone that wants to purchase a home.

But if you can’t find affordable insurance due to your location, what are your options?

In most cases, your best option will be to get coverage through a Fair Access to Insurance Requirements (FAIR) Plan. These plans are designed to help homeowners that can’t find coverage through traditional means protect their homes against disasters like wildfires.

While FAIR Plans do offer essential coverage for high-risk homes, they are typically very bare-bones. FAIR Plans often do not cover theft or liability, and in California, FAIR Plans are limited to $1.5 million in coverage, which may or may not be sufficient for some homeowners.

With this in mind, homeowners should make an effort to find affordable coverage through traditional means before paying for coverage through a FAIR Plan.

Protecting Your Home Against Wildfires

Wildfire insurance can help you recover from damages caused by wildfires, but homeowners should still implement precautionary measures to mitigate potential damages.

Here are a few ways you can protect your home against wildfires:

  • Install a roof sprinkler system to hydrate the exterior of your home and help prevent ignition due to smoldering embers.
  • Use fire-resistant building materials, like dual-pane windows, to harden your home against fires.
  • Remove flammable items from around your home or apartment.
  • Trim bushes and shrubbery to create more space between flammable vegetation.

Homeowners should also create an evacuation checklist so that they are prepared if they need to evacuate due to a wildfire.