Property and casualty liability insurance — including home, auto, and umbrella coverage — has become more complicated and expensive in recent years, especially in California. Here are some important issues to be aware of as you review your coverage.
Insurance Companies Are Paying Close Attention to Property Conditions
Many insurance companies now use aerial photography and drones to evaluate properties. Overgrown vegetation, deferred maintenance, aging roofs, or visible fire risks can potentially affect your insurability or premiums. Keeping your home well maintained is not only important for safety and property value — it may also help protect your ability to obtain and keep coverage.
Water Damage Claims Are Extremely Common
Water damage remains one of the most frequent causes of insurance claims. Small leaks can become very expensive problems. Make sure you understand what your policy covers and whether your coverage limits are adequate. If you are unsure, ask your insurance broker or agent to walk you through your policy and help identify potential gaps.
Insurance Is Designed for Catastrophic Losses
Frequent or relatively minor claims can sometimes lead to higher premiums or difficulty obtaining future coverage. If you are uncertain whether to file a claim, it may make sense to first discuss the situation with your broker, agent, or financial advisor before proceeding. When calling your insurance agent to ask for advice on a potential claim, consider calling rather than sending an email – and asking about your “hypothetical” situation before deciding to make a claim.
Not All Insurance Companies Are the Same
California’s insurance market has changed significantly, and many homeowners are now being placed with non-admitted insurance carriers. These carriers have more flexibility on policy design and pricing, but California will not cover their clients if the carrier cannot pay claims.
These companies can play an important role in providing coverage when admitted carriers will not cover your property, but they do not offer the same protections as California-admitted insurers. It is important to understand who is insuring your property and what protections apply. Work with an experienced insurance broker who can offer policies from multiple insurance companies to help you evaluate your options more carefully.
Focus on Being Properly Insured — Not Just Getting Insurance
Sometimes the priority becomes simply securing a policy in order to complete a home purchase or maintain required coverage – or minimizing premiums. But the quality and adequacy of the coverage matter.
Take time to understand:
- Your dwelling coverage limits
- Replacement cost assumptions
- Liability protection
- Deductibles
- Loss-of-use coverage
- Umbrella insurance limits
- Damages that are not covered and/or coverage is limited
A good broker or agent should be able to explain these issues clearly and provide analysis.
Understand What Would Happen After a Major Fire Loss
Large wildfire events have become an unfortunate reality in California. It is important to understand ahead of time how your policy would respond in a worst-case scenario. Would your policy provide enough funds to rebuild at current construction costs? How long would temporary housing be covered? Would you want to rebuild — or would you prefer the flexibility to walk away from the property? These are difficult questions, but they are much easier to think through before a loss occurs.
Liability Risks Are Increasing
Liability claims and lawsuit awards have increased significantly in recent years. This makes umbrella insurance more important than ever, particularly for higher-income households or those with substantial assets. There has also been increasing outside investment in the personal injury legal industry, including private equity financing of high-volume plaintiff law firms and related operations. Many industry observers believe this has contributed to a more aggressive litigation environment.
For that reason, it may be worth reviewing:
- Your umbrella liability limits
- Whether your coverage coordinates properly with your home and auto policies
- Any exclusions or limitations in your policies
Insurance Is Complicated — Ask for Help
Insurance policies can be difficult to interpret, and many important details are easy to miss. Do not hesitate to ask questions and seek guidance from your insurance broker, agent, or financial planner. A thoughtful review today may help prevent major surprises later.