Marc Cuniberti Once again we come into the fire season and the calls about and for fire insurance policies abound. As an agent and owner of an insurance company, I find homeowners asking good questions and not-so-good questions, of which some are based on misconceptions about what is going on in the industry as it relates to homeowners’ policies.
Some time ago most residential homes were covered under one inclusive policy called an HO3 (HO= homeowners).
With the increase in wildfires, many insurance companies took huge losses, and over time, some have elected to remove the fire portion of coverages from their policies. They also removed lighting, wind and internal explosion, and other related coverages for a variety of reasons.
Insurance companies may still offer coverage for your home, but many have removed the fire and related risks mentioned above.
On rare occasions, an insurance company will still offer the all-in-one HO3 in fire areas but homeowners won’t know this unless they submit an application. The why or why nots as to why an insurance company may make these rare exceptions have some rhyme and reason to it, but usually that is known only to the insurers.
Nowadays it is common to have a fire policy and what is called a “wrap” policy or better known as a “Difference in Conditions” policy (DIC). The DIC is written by your regular insurer if they decide not to offer you a complete policy (HO3), and then you will likely need a California Fair policy for the fire portion of the coverage.
Cal Fair is not a state agency. It is a group of all the insurers that do business in the State and operate much like the “assigned risk” coverage for bad drivers. Cal Fair is all these insurers grouped together which then share in the losses and gains of the combined policies.
One could argue they may be financially bulletproof, which means unlike some insurance companies that may have gone under due to massive wildfire losses in recent years, Cal Fair may draw on the resources of the combined strength of the entity. They are also covered under the California Insurance Guarantee Association. (https://www.ciga.org/about_ciga.html).
Many of the phone calls I receive complain about Cal Fair and some say they want other options. When asked why, they usually respond, “because they’re too expensive”.
I always respond with the same answer, which is “usually no agent wants to write a Cal Fair policy because its compensation to agencies may not be commensurate with other rates. In addition, if you’re stuck in a hole and only one guy throws you a rope, you don’t complain. Your choices are if you don’t like Cal Fair, don’t get insurance. And when you’re regular insurer does come back to insure fire, you will probably wish you had Cal Fair”.
I say this because I find Cal Fair to be highly regulated, scrutinized and skinny on compensations as mentioned above. Not so with the big insurers in my opinion. So if you think Cal Fair is high, just wait. My opinion again of course.
The trick to navigating all this is getting a responsive agent who will take the time to discuss coverages, limits, deductibles and explain how it all affects your premiums. I can honestly say many customers I talk to tell me horror stories of agents not returning phone calls or not even answering their phones, being rude or short, telling customers they’re just too busy, or out-of-state cookie-cutter type agencies winging quotes with little discussion to the client.
The best way to make sure you get the right coverage at the right price is to work with a knowledgeable local agent, who will call you back, explain the policies, take the time to make sure all your questions are answered, and get you the right limits and deductibles for your situation.
Opinions expressed here are those of Mr. Cuniberti and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee, or to be construed as investment advice. Neither Money Management Radio (“Money Matters”) receive, control, access or monitor client funds, accounts, or portfolios. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249 and Medicare Agent approved.
Photo by Marcus Kauffman on Unsplash
