Located on the West Coast, California is the post populous U.S. state and home to eight of the nation’s 50 most populated cities. Since the state is prone to both earthquakes and wildfires, California homeowners should seriously consider the benefits of purchasing some kind of home or residential insurance.
How Much Does California Home Insurance Cost?
According to the Insurance Information Institute, in 2010, the average annual premium for homeowners insurance in California was just $939. The best way to get a good value is to compare rate quotes from numerous companies for the same or similar levels of coverage. The California Department of Insurance (CDI) provides several Consumer Information Guides that provide helpful information on homeowner’s or residential insurance. The CDI also provides a list of current insurance companies licensed to sell residential insurance in California.
A variety of factors influence rates in California, including the age of your home, your home’s location in proximity to fire hydrants and fire protection services, your claims history, and how your home is constructed. Older homes generally cost more to insure because they were not built according to modern codes that add greater fire resistance and are more likely to have aging plumbing and electrical wiring, all of which pose additional hazards. Wood frame homes also generally cost more to insure than brick homes because of their increased vulnerability to fire.
If you are having difficulties finding home insurance companies in California that will sell you a policy because your property is considered “high risk,” the state offers the Fair Access to Insurance Requirements (FAIR) plan. This plan allows California homeowners who have been denied coverage to purchase a basic fire insurance policy for both the structure and contents of their home.
What Does It Cover?
Home insurance in California helps protect against financial loss in the event that your home is damaged or destroyed by unforeseen perils named in your policy, such as fire, windstorm, hail, or vandalism. The policies that California residents purchase generally includes liability coverage, which pays for any lawsuits that could result if you, your family members, or your pet causes injury to another person who does not live in your household.
Do I Have to Get Home Insurance in California?
Home insurance is not required by law in California. But buying insurance can help protect your house and property against damage from unforeseen circumstances, and liability for accidents that injure other people or damage their property.
Optional Coverage to Consider
- Flood. Many homeowners are unaware that flood insurance is typically not included even in the most comprehensive of home insurance policies. California residents in participating communities can purchase flood insurance through the National Flood Insurance Program (NFIP), which is offered through licensed agents or private insurance companies in California in collaboration with FEMA. Your mortgage lender will generally not require you to purchase flood insurance unless you live in a flood plain but that doesn’t mean homes outside of high-risk areas are safe from this peril.
- Fire and Lightning. While fire and lightning coverage is included in most standard homeowner’s insurance policies, some policies exclude this important protection. Areas of California are particularly at risk of wildfires and firestorms, so it’s important to make sure you are adequately protected from this peril. As recently as 2012, historic wildfires have decimated areas of Southern California, destroying thousands of homes and damaging property.
- Hazard. The terms hazard insurance and home insurance are often used interchangeably. Hazard insurance may refer to the portion of your policy that protects your home, its contents, and any outbuildings. While hazard insurance is not required by California law, your mortgage lender will generally require you to purchase it to protect their investment. However, the minimum amount of hazard insurance required to satisfy your lender may not be enough to cover you in the event of a natural disaster. Carefully evaluate the policy limits in your dwelling policy and determine if they are high enough to replace your home should the unthinkable happen.
- Windstorm. Windstorm and hail coverage is included in many standard homeowner’s insurance policies, but may be excluded from coastal areas that are at high-risk of damage from high winds or tropical storms. Read your policy carefully to determine if you will have adequate coverage for severe weather events, and ask your agent if your insurance policy covers associated problems, such as tree and debris removal after a windstorm. You may need to purchase a special policy that covers windstorms and hail.
- Earthquake. California sits atop some of the most active fault lines in the world, making earthquakes a distinct hazard in the state. However, earthquake insurance is not included in most standard homeowner’s insurance policies. According to the California Department of Insurance, earthquake insurance in California must provide coverage for your dwelling, personal property, and if you occupy the dwelling any additional living. Because of the threat earthquakes pose to homeowners in California, the California Earthquake Authority helps ensure homeowners, mobile home owners, and renters have access to earthquake insurance coverage through participating insurance companies.
- Replacement Value Coverage. When purchasing homeowner’s insurance, you have the option to replace your home and belongings at actual cash value (ACV), which takes into account depreciation, or at replacement value, which is what it would actually cost to replace your home and belongings (up to the policy limit or a set percentage above your home’s ACV). Replacement value coverage is generally more expensive than ACV coverage, but provides more thorough coverage in the event you lose your home and it needs to be replaced. If you opt to insure your home at market value, you may end up having to pay for what your insurance did not cover out of your own pocket if disaster strikes or otherwise end up settling for a smaller home.
- Scheduled Personal Property Endorsement. A scheduled personal property endorsement, or personal property floater, is needed if you have certain valuables that require a greater level of insurance coverage. For instance, if you have a collection of fine furs or antiques, guns, or expensive jewelry, you should consider itemizing them on your insurance so that you can adequately recoup their loss if they are lost or stolen. The homeowner will describe these valuables in detail in the policy.
- Secondary Residence Premises Endorsement. Many California residents own more than one residence, such as a summer home or vacation home. To make sure that your other residence is adequately protected, consider purchasing a secondary residence premises endorsement, which will cover the cost of any damage to the secondary home or its furnishings.
Mobile Home Insurance in California
California mobile home or manufactured home policies protect against damage or destruction to your mobile home or its contents as well as theft of its contents and personal liability. Many policies are similar to traditional homeowner’s insurance in that they include liability coverage in the event that you, your family members, or pet causes injury to another person. The California-based Auto Insurance Specialists can save you money by packaging your auto and mobile home insurance policies with a single carrier.