Most Californians are well aware of the wildfires that have ravaged the state. They watched the news with a sense of hopelessness as 20,000 homes burned in the last two years. However, most Californians are not aware of the dramatic increase in homeowners insurance that is just around the corner.
Insurance companies often view an entire state as a marketplace. When part of the marketplace is affected by a natural disaster, the entire marketplace suffers.
California is no different. Even if you do not live in areas directly affected by the wildfires, your marketplace is still affected.
At Mesa Properties, we have been watching the insurance market closely. So far, the most dramatic increase seen in our territory is from $400 to $1700 per year for homeowners insurance.
You read that right, an increase of 325%
This is a direct result of the more than $11,800,000,000 ($11.8 billion) that insurance companies are currently paying out.One of our insurance providers has informed us that they will no longer even attempt to write new rental policies for the state of California. And, existing policies are subject to dramatic increases in price.
Insurance companies are expected to start rolling out these increased costs this year. The exact amount is unknown, but we do not expect all increases to be as dramatic as 325%. However, it will be significant.
It's Not The End of The World
According to California's official numbers, rents have increased 17% over the past 10 years. If you have questions about how much your property will rent for, check out this resource.
This increase in rent is more than enough to offset the increase in insurance costs.
Additionally, California minimum wage will increase to $15 per hour in four years. Mesa Properties does not have a crystal ball. However, with increasing wages we expect rents will continue to rise.
What Can Owners Do?
I have talked to insurance experts and they have recommended the following:
1. Get the highest deductible you can afford
To get the best insurance rates, you have to play their game. One way of keeping costs down is to have a high deductible. This will force you to only use insurance when you absolutely need it. This type of insurance will only protect you when something catastrophic happens.
2. Try to Avoid Filing Multiple Claims
Insurance companies know that lightning doesn't strike twice. If you have a legitimate accident, it's okay. Insurance companies understand that rare accidents happen. It's why they exist.
It is not recommended to file multiple claims about small items. Every time a claim is filed, it costs insurance companies money to investigate the claim. To keep your costs down, don't file insignificant claims.
3. Pay On Time
It sounds super basic, but it is absolutely necessary to pay your insurance bills on time. If you do not pay on time, you run the risk of having a lapse in your insurance coverage. Also, you are more likely to be dropped or have your rates increased if you are not a good customer.
4. Shop The Market
Many insurance companies offer bundles. You've seen the commercials, they usually have a catchy song and some sort of talking animal. They say something like, "switch to us and save big!"
They are usually talking about a bundled rate that combines your primary residence and your car. This bundled rate may or may not save you money on your rental.
It is our advice to shop the market. Look at the big companies and look at the small companies. In our experience, you might be able to find a better rate if you go with a small company that specializes in insuring rental property.
What Does Mesa Properties Do?
Mesa Properties has worked with Deans and Homer insurance company for years. If you want a quote from them, give Fran a call. She's a broker that works at Crosby Victorville Insurance and writes for Deans and Homer.
Mike Nauertz is another insurance agent that writes for Mercury. Full disclosure, he is a good friend that works right next door to Mesa Properties. Feel free to give him a call if you want a quote.
Ultimately, we recommend that you maintain an adequate level of insurance. Insurance prices are going up for a reason. Areas that were considered low risk are now burned to the ground. Cutting your insurance now might save you a few hundred dollars today. But it will not be worth it in the long run.
If you have any questions about your rental and the changing circumstances in which we live, please feel free to give us a call. We'd be happy to talk to you about your specific situation.
We are not lawyers nor a law firm, and we do not provide legal advice. None of our employees or representatives are lawyers, and they also do not provide legal advice. We are also not insurance agents, and do not offer official advice. We recommend you contact a licensed insurance agent before you make any decisions. Our website and services are not substitutes for actual lawyers. We recommend that you consult a lawyer for all legal advice.