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How to Find and Keep Fire Insurance. Real Estate column by Gina Carling and Robert Carling

By Gina Carling and Robert Carling

The CZU Lightning Complex fires became the largest wildfires in Santa Cruz County history. The fires caused significant economic damage, estimated at over $1 billion. They burned for 37 days, destroying 86,509 acres of land and 1,490 structures, including 911 homes.

With resilience, San Lorenzo Valley, bolstered by the spirit of its communities, is working on bouncing back. Living in this area is not a mundane inhabitance, it is a love affair. It will take more than a horrific fire to scare most of us away.

Unfortunately, one of those things that now is scaring some people away is the homeowner fire insurance that we need to protect our properties. Many of the major insurance providers have been on a steady drumbeat to withdraw coverage from the Santa Cruz Mountains for some time now. One that had not, and was previously seen as a steady go-to, was State Farm. On May 26, they announced that they would no longer accept new homeowners insurance applications, and were vacating the state all together. Allstate, Farmers, and AIG soon followed suit.

Why This is Happening?

Insurance is a concept that many do not understand fully, as the practice of it is full of paradoxes. Many who have it, which most of us do, get highly frustrated when our rates go up, but we have been perfect customers never taking risks, and never making claims. That is because insurance is not set up as a one-to-one relationship. It is not about the specific relationship between you and the insurance company. Insurance is about risk sharing with a large population. In this case, all of us in San Lorenzo Valley are in it together.

The fact is, insurance companies only really want to insure people or homes that are very unlikely to ever have claims. Through their screening efforts however, there are a percentage of their customers who will have a disaster and they will contractually have to pay out. While most of us spend our years paying many thousands of dollars to the insurance company and getting nothing back from it, those few in our community whose houses burned to the ground will potentially have paid many thousand dollars as well, but gotten, in some cases, many hundreds of thousands to potentially over a million dollars back. It is all about gambling. Insurance companies are gambling that they have to pay out as little as possible, and people with insurance are gambling over a future need to have their insurance company pay out.

To hedge their bets even further, once a claim is made by a homeowner, even if that claim is only for expenses due to an evacuation, the property is then classified by insurers as a less desirable candidate to insure.

For many in San Lorenzo Valley, this has made the insurance picture harder. We were ALL evacuated during the CZU Lightning Complex fires. Those of us who claimed our hotel or other expenses on our insurance unknowingly dinged our properties as riskier insurance prospects on paper.

Insurance claims do not follow the property owner, they follow the property. This means that if you made a claim, the situation was rectified, and then you sell your house, the new owner is going to have a tougher time getting insurance, or a great rate, as a result. It is not fair, but it is important to understand the ramifications as we make financial decisions.

This Issue is Not Unprecedented

We are definitely living in dramatically new times. Climate change and the effects of global warming are having severe impact on our local environment. From an insurance threat perspective, we have been in a similar predicament before and a solution was carved out. We need to press upon our California Insurance Commissioner and state representatives to approach this issue in a similar manner.

There was a time that Insurance companies happily made earthquake coverage part of their packages to homeowners. In doing so, they amassed a stockpile of funding in the hundreds of millions of dollars.

What a difference a day makes. On January 17, 1994 a magnitude 6.7 earthquake hit Northridge California. The losses from that quake triggered payouts totaling over $20 billion dollars, many times over the entire reserve Insurance companies had compiled. It nearly bankrupted them all, and the vast majority of insurers quit offering earthquake coverage at all. This left many homeowners without earthquake insurance, and those who did have coverage found that their premiums had skyrocketed.

In response to the crisis, the California government created the California Earthquake Authority (CEA), a state-run insurance program that provides earthquake coverage to homeowners who cannot obtain it from traditional insurers. The CEA has helped to stabilize the earthquake insurance market in California. They now also use more sophisticated tools to assess earthquake risk instead of historical data. These tools include computer models that can simulate the effects of earthquakes of different magnitudes and intensities.

Now with the fire issue, California has set up the California FAIR Program. The concept is similar to CEA, but since its inception, the demand for it has gone far beyond what had been anticipated. It is a start, but we need to put pressure on our state representatives to elevate its reach, effectiveness and cost management.

How Homeowners Can Cope with the Current Insurance Offerings

Below are some of the avenues and choices potential homeowners can take to insure their beautiful mountain homes. None of these are guaranteed or in stone, as each property and owner is evaluated differently, and insurance company terms change frequently. See a trusted insurance agent or broker to lay out a plan that works for you. Here are some general guidelines to think about:

  • What risk are you willing to take on? When you find an insurance solution, it generally is not a “one size fits all.” Rather, it can be constructed to match your priorities. This means that you have to be realistic. You are not likely to find coverage that is inexpensive, covers you for the maximum amount, and will be a smooth process should you have a claim. Solutions can be found that may provide one of the three, but you have to give on the others.

  • Risk of minimum coverage Many people have home insurance because it is mandated by their mortgage company. If that is your primary reason for coverage, your mortgage company will often be satisfied by just enough coverage for them to be paid off in case of a disaster. The ramifications here are that you could end up owning a piece of property outright, with a destroyed house, but no funds to rebuild.

  • Cost of maximum coverage California FAIR can cover your house in case of fire up to millions of dollars. You can make the choice to have this coverage be lucrative so that it covers your mortgage AND your re-build costs. You will need to also have an additional policy for other insurance needs as the California FAIR plan ONLY covers fire and no other issues like liability coverage, or a tree falling on your house, for example. Some insurance companies that possibly offer this “wrap-around” coverage may include American Modern, Beacon, First Republic, and Tower Hill. Also check with your local Farmers or AAA insurance agents.

  • How to lower cost but get robust coverage One way to bring the insurance premiums down, without compromising on your coverage, is to have a very high deductible. Many homeowners dream of the comfort of only having to pay a few thousand out of pocket should disaster hit. In many cases, when reality hits, it is better to have to come up with 20 thousand dollars up front for a million dollars’ worth of coverage, than to only pay 2 thousand, but only have a hundred thousand with which to rebuild.

  • Beware the “good deal” The old adage “if it sounds too good to be true, it probably is” holds true. If you get a “great” insurance deal, do your due diligence and make sure the insurance company is sound and will be there should you need them. Research past customer experiences, and the financial backing of the company. Some who lost homes in the Paradise fire a few years ago had both a burned down dwelling and an insurance company that evaporated. Don’t let that be you.

The bottom line is that San Lorenzo Valley is still a beautiful and vibrant place to live. There are insurance options available, and the solutions can range from paying more to being only minimally covered. This is not particularly fair, and we need to collectively strive to have our state officials address it. In the meantime, we can make some educated choices and still live our rich and pleasurable mountain lives.


Gina Carling is a Felton resident and local Realtor. She has resided in Santa Cruz County since 1970. Gina has earned the Top 10 Real Estate Agents in California Award for Exceptional Client Satisfaction since 2017. Best of the Best Real Estate Agents, Top 10 Award since 2019, U.S.DRE Excellence Award.

Robert Carling is a Felton residents and local Realtor. He as lived in Santa Cruz County all his life. He attended UC Davis and earned a bachelor's degree in Managerial Economics. After college, Robert played two seasons of professional baseball in the MLB-partnered Frontier League and American Association.

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