Fire Insurance Companies Are Doing What They Can to Mitigate Costs
As the wildfires rage on in California, several fire insurance companies are trying every tactic they can think of to ensure they stay afloat, even while paying out billions of dollars in claims yearly.
Source: iStock
These solutions have included pausing or stopping the signing of any new fire policies, increasing their premiums, or forcing policyholders to make improvements on their homes to remain covered.
One Company Is Even Dropping 17,000 Policy Holders
One big-name company, Liberty Mutual, recently announced that it will terminate 17,000 California fire insurance policyholders over the next three months.
Source: Liberty Mutual
However, Liberty Mutual Fire Insurance says the decision has nothing to do with California’s ongoing wildfires and the subsequent losses. Instead, it’s apparently about their outdated technology.
Liberty Mutual Says It’s Dropping California Policyholders Because of Tech Issues
According to the announcement, the company is retiring an “antiquated” technology that manages its hundreds of thousands of policies. And that “it is not feasible to create a new system to support this product in California” anymore.
Source: Freepik
They also noted that some policyholders in other states will likely be affected, but Liberty Mutual has yet to release that information to the public.
Liberty Mutual Fire Insurance Covers 10% of the State’s Households
It’s important to note that 10% of California households with fire insurance are covered by Liberty Mutual, so technically, 17,000 homes are actually quite a small number of their policyholders.
Source: Shutterstock
That being said, this will still affect 17,000 Californians who now need to find a new fire insurance company as quickly as possible as the wildfires rage on.
Liberty Mutual Will Still Offer Fire Insurance through Safeco
Liberty Mutual hopes that these 17,000 Golden State residents will turn to their subsidiary, Safeco, for their fire insurance needs.
Source: Safeco
However, in May 2024, Safeco announced it would raise fire insurance rates by an average of 10.5% during the next renewal cycle.
How Much Is Fire Insurance in California?
As of 2024, the average California resident pays $1,460 yearly for home insurance, including fire insurance.
Source: Freepik
While that is slightly lower than the national average of $1,915, the problem is that California residents already pay far more in taxes, utilities, housing costs, and the general cost of living than those in almost any other state.
FAIR Plan Insurance in California Is More Expensive
Additionally, while Californians may be paying a few hundred dollars less annually than other Americans for home insurance, millions of others who couldn’t find a private insurance provider are paying much more.
Source: California FAIR Plan
Several years ago, the FAIR Plan was created to offer fire insurance to residents at high-risk properties that private companies wouldn’t cover, but it is incredibly expensive. Many California residents say they’re paying more than $2,000 a year just for fire insurance.
Taxpayer Dollars Are Being Used to Protect the State From Wildfires
While both private insurance companies and California’s FAIR Plan are slowly but surely increasing the cost of fire insurance in California, the state is also spending billions of resident tax dollars on fire protection.
Source: Freepik
Since 2017, California has spent $30 billion on fighting and preventing wildfires, which is reflected in its growing property taxes.
Fire Insurance Is Necessary in California
Of course, as wildfires continue to burn and destroy hundreds of thousands of acres of California, protecting the state and having fire insurance are both absolutely essential.
Source: iStock
But it’s still incredibly frustrating to California residents who can barely afford to live in the once idyllic state.
California Is Both Dangerous and Expensive
The cost of insurance and wildfire prevention is just the latest in a long list of reasons why the Golden State has become the third most expensive state in the entire nation.
Source: Reddit
From taxes to transportation, housing costs, rent prices, utilities, and consumer goods and services, Californians pay around 30% more than the average American. Now, with the wildfires, flooding, drought, heat waves, and rising sea levels, the state isn’t just expensive; it’s also dangerous.
More Insurance Companies Could Abandon the Golden State in the Coming Years
In response to the growing number of natural disasters in California, as well as the costs of repairs, assessments, and even employment, more insurance companies may soon abandon the Golden State.
Source: Freepik
Experts say the 17,000 residents who are losing their Liberty Mutual fire insurance this year may be just the beginning of an insurance crisis across California.