Rising Insurance Costs in High Fire-Risk Areas

When a home is purchased with a mortgage, using a loan from a bank, the bank will always require the homeowner to get insurance in order to make sure their investment is protected to some extent. Insurance, while a necessity, can be a costly addition to one's monthly or yearly bills. Since an insurance company wants to stay in business, it charges higher rates to provide insurance to individuals in high-risk areas: flood zones, fire zones, earthquake centers, etc, so that it will have the money to pay off claims involving fixing or rebuilding of affected properties. For people like John Stoffan in Samantha Masunaga's L.A. Times article, the costs of fire insurance in drought-parched California make the state almost too costly to bear.

The Stoffan family, whose Northern California home survived various wildfires around Yosemite National Park throughout the years, is finding that their insurance rates may actually be the reason they finally jump ship. The house itself, as well as the county in which it is situated, are considered to be "high-risk" for insurance companies. Even after having installed fire-resistant plants, developed "buffer zones" of areas without any plants surrounding the property, and created holding areas to keep thousands of gallons of water on hand, insurance companies have doubled rated in the past year.

The past four years of dry conditions have made things worse for those living near large forests. The combination of summer temperature and lack of water can turn a forest into a raging wildfire with the merest spark. Because of this risk, home-owners like the Stoffans, no matter how many preventative measures they take, are stuck between a rock and a hard place. They need insurance to have a mortgage to own a home, yet the insurance rates are unaffordable and getting worse. What is their alternative?

While all are hoping for a good winter to break California's dry spell, many are considering moving out of the area altogether. Others have found more creative options to reduce their insurance costs. Some people, like Alpine's Mollie Jacques, have been able to find significant discounts by using insurance companies based in other cities. For Jacques, her choice to switch to an insurance company 100 miles from her home saves her over $700 per year. Some homeowners have even been refused insurance completely and have been forced to use the California Fair Plan Association to have some, albeit limited, coverage.

Communities are coming together in these fire-prone areas to try to make their homes and surrounding land as safe as possible. Since insurance companies determine rates through statistics involving fire department preparedness, water supplies, and availability of emergency communication. With the help of the California Fire Safe Council, a nonprofit organization, such communities are able to purchase wood chippers and other machinery to help clear dry brush and other flammable material. The more prepared a community becomes for a wildfire, the better rates insurance companies will provide. It comes down to economics. Insurance companies will charge a lot of money for taking on a huge financial risk. The more you lower that risk for the insurance company, the less money they will require you to pay.

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