Southern California Homeowners Insurance Issues
Your home purchase is one of the largest investments you are likely to make, so there’s no doubt that having adequate homeowners insurance is important. As a homeowner in southern California, however, you have some unique hazards that the rest of the country never has to deal with, like wildfires, mudslides, and earthquakes. For this reason, it’s important to know how to save money on homeowners insurance as well as when it’s appropriate to spend money on extra coverage.
The Basics
Most standard homeowners insurance policies, which are also referred to as property insurance or hazard insurance policies, provide coverage for damage to your home, the items within it, and other structures on your property, if it is caused by:
- Theft
- Fire and lightning
- Smoke
- Vandalism
- Ice and snow (rarely needed in SoCal)
- Wind
- Broken pipes/water leaks.
In addition, standard policies include coverage for liability claims and medical payments to third parties who may be injured on your property, as well as legal fees if you are sued. $100,000 is a common amount of such coverage, but depending on your circumstances (if you have an extremely expensive home, own a business, or work in a high profile career) you may need much more.
Beyond the Basics
Basic comprehensive coverage is designed to protect you from average hazards, but living in southern California is anything but average. For this reason, when you shop for homeowners insurance you’ll need to budget separately for earthquake insurance, and, if you live in the mountains, you’ll probably want to consider flood insurance, and increasing your fire insurance. Depending on the age and location of your home, you might also want to consider special insurance for mold.
- Earthquake insurance is always extra, never part of a standard policy, but it isn’t that expensive .
- Flood insurance is sold through a national program. Lenders require it if you live in low-lying areas where flooding is likely, and is optional without it, but without flood insurance you may not have coverage for damage because of mudslides.
- Wildfires have been a significant cause of damage claims throughout California, and many insurers are increasing premium rates in high-risk areas, or offering special policy endorsements to cover wildfire-specific damage.
- Mold testing has become an increasingly common part of California real estate transactions, and evidence of certain kinds of mold spores has caused deals to fall apart. If your insurance policy already covers water leaks, and those leaks lead to mold issues, you should be covered for mold-related damages, but you may need a specific endorsement.
Most insurers exclude acts of war, nuclear accidents and (now) acts of terrorism, so damages from those things are never covered, even via special policies.
Shopping and Saving
Now that you know what policies should include, and what extra endorsements or separate policies you may need, you need to know how to shop for the best deal. Here are some tips:
- While mortgage lenders typically require that your insurance coverage be equal to the appraised value or purchase price of your home, the number everyone should be looking at is the replacement cost of the house – the cost to rebuild it if there is a total loss. This is what you should base your coverage upon. Remember, that if the replacement cost is less than the purchase price, your lender cannot require insurance coverage that exceeds it.
- Most homeowners insurance policies include coverage limits for items that are high-value or difficult to replace. If you own art, antiques, or expensive jewelry, you may need to have each item appraised, and have special endorsements added.
- Does your home have a security system? If so, you may qualify for a discount when you shop for insurance, though such discounts usually require that the system be monitored.
- Got cash? If cash flow isn’t a problem for you, consider a higher deductible – the amount you pay out of pocket when you file a claim – since raising your deductible will net you a lower premium.
- Bundle up. Moving into a new home may mean new auto insurance as well as a new homeowners insurance policy, considering bundling them with the same insurer. Doing so will give you another discount.
- Shop around. It may be tempting to go with the first quote you get, but comparing policies and premiums will not only save you money, but it will also allow you to see exactly how different coverage options compare.
Living in southern California means great weather, gorgeous landscapes, and access to amazing cultural opportunities, but it also means you have to pay special attention to your homeowners insurance options. Before you shop for insurance, consider meeting with a financial planner, and don’t buy any policy until you’ve talked to an agent about coverage limits, and ensured that you are insured for enough.
