Top SF Realtor POV: I Don't Want To Scare Anyone

Writings about residential real estate and all things home, by Cynthia Cummins of Kindred SF Homes.

Reading time: 2 minutes

“He who laughs has not yet heard the bad news.” ~ Bertolt Brecht

I’m not here to alarm you unnecessarily, but this is one post you may want to continue reading.

If you’ve followed the news at all, you’ve probably heard about the current “Homeowners Insurance Crisis” affecting much of California – especially properties located in wildfire-prone areas. Because San Francisco isn’t susceptible to wildfires, you might assume city properties are unaffected. This is not true.

Here are the Cliff Notes (a la yours truly): Insurance companies have been paying out lots of insurance claims in California (as you already know). They say they are prohibited from raising their rates enough to stay in the insurance business in California (a new variation on a recurring theme). So, a bunch of insurance companies have ceased writing any new insurance policies in California (Allstate, State Farm, others). And other insurance companies are tightening the screws on what sorts of properties they’ll write policies on.

In San Francisco, some insurers are refusing or hesitating to insure, due to some of the following reasons:

• Property is older than 30 years (most of the housing stock in SF)
• Roof is leaking or made of wood (calls into question “as is” sales)
• There has been past water damage (claimed on insurance or evident in the house)
• Property has not been seismically upgraded (professionally and/or with permit)
• There is knob and tube wiring in the walls (many electrical systems updated with circuit breakers still have knob and tube wiring)
• There is a mold issue.
• Etc. etc. etc.

You may have heard that the California Fair Plan, offered through the state, is the insurer of last resort (as in “you can always get insurance through the Fair Plan.”) You need to know it is relatively expensive and coverage is limited to fire hazard only, so you must purchase supplemental insurance for things like liability. Plus, the upper limit of hazard coverage is $3m. Yet even the Fair Plan doesn’t cover properties that affected by the issues cited above.

Takeaways:

1. Keep your current insurance in place and pay your premium on time. I cannot emphasize this enough!
2. If you are thinking about selling your SF home anytime in the next few years, you may need to do physical work to the property in advance (new wiring, mold remediation, brick foundation replacement, etc.) so the NEW buyers can qualify for insurance coverage. Before embarking on any projects, you’ll want to talk with an insurance expert to ascertain what to do, how to do it and how to document it. 
3. If you are thinking about buying a home in SF, you must consider every candidate property’s insurability. This affects value. It affects your ability to obtain financing. It influences which terms you’ll include in an offer.
4. When seeking insurance – do not begin by seeking online or phone quotes. Every form you fill or call you make can narrow the markets available to you. It’s better to keep your options as open as possible by shopping finding a reliable insurance broker (ask me for a referral) and letting them do the vetting and comparisons. 
5. Stay informed and don’t ignore what’s happening with the insurance market in California.

This is complex and evolving, and your own situation is unique. If you have questions or concerns, or want to know more, please reach out to me. I can help you think through your scenario and I can refer you to excellent insurance professionals to audit your situation, advise you about your next move, and help you obtain adequate insurance.

Photo Credit: Thom Milkovic