The California wildfires are so extensive that satellite images from NASA show smoke reaching the East Coast and even Europe. It’s been a busy and devastating couple of years for firefighters. The California Department of Forestry and Fire Protection (CAL FIRE) reports almost 8,000 fires and damage to nearly 7,000 structures just in 2020. 

On the other side of the U.S., coastal zones have been walloped by hurricane and tropical storm activity in the last few years. Natural disasters are becoming more severe from global warming. According to the Center for Climate and Energy Solutions, extreme weather events causing billions of dollars in damage will become the norm due to climate change. Insurance companies, already hit hard by fire, storm, flooding and wind damage claims, are positioning themselves for these changes. 

The insurance industry is a profitable business. Roughly 2,500 insurance companies in the U.S. collected $613 billion in premiums in 2018 from homeowners, auto and commercial insurance. Of the $613 billion collected, they paid out about $50 billion in claims. 

After writeoffs, insurance companies reported an average income of $60 billion in 2018. They protect their bottom line by essentially passing on the cost of natural disaster claims to homeowners. Higher premiums, pulling back from insuring high-risk zones and even canceling homeowners insurance are ways insurance companies protect themselves against losses.

Are Insurers Canceling Homeowners Insurance Policies?

It may seem unethical to cancel home insurance at a time when a homeowner needs it most. After all, many have faithfully paid their insurance premiums for years, often without a claim. Unfortunately, this doesn’t provide them with any protection. For homeowners in high-risk areas such as wildfire zones, their ability to get home insurance (and keep it) is vanishing. 

Let’s dig deeper. Reinsurance is a type of fund that insurance companies pay into in order to share the risk of catastrophic claims. If the reinsurance fund gets low from too many claims, insurance companies have to pay higher premiums to replenish it. As you can imagine, the reinsurance fund may be low in some states with catastrophic natural disasters. 

[ Read: The Best Homeowners Insurance Companies ]

Florida insurance companies saw a 26% increase in their reinsurance premiums on June 1 of 2020. They knew it was coming — somewhat. A.M. Best had forecasted a 15% to 20% rise earlier in the year. The 26% increase was higher than many expected.

According to the Miami Herald, Jimmy Patronis, Florida Chief Financial Officer, had to step in to pressure insurers such as Citizen’s Insurance to hold off on insurance cancellations before the upcoming hurricane season. According to Patronis, “Hurricane season is just beginning to heat up and we are in the middle of an unprecedented health and economic crisis.” He adds, “This is not the time to cancel Citizens’ home insurance policies.” Those affected by the possible cancellations are safe — for now. It’s likely they’ll still get canceled after hurricane season.

How Hard Is It to Get Insured in a High-Risk Area?

Getting insured in a high-risk area is typically harder. Jacques Wong, an insurance advisor with the ReFrame Group, is seeing underwriting requirements tightening. “Insurers are pulling back on their risk appetites and increasing premiums across the board,” he says. He believes it’s due to a few factors, including “a sharp uptick in natural disasters, COVID-19 and the general economic slowdown.” 

Wong says, “Insurers, like other businesses, are being really conservative about taking on additional risk and liabilities at this stage.” They may send out assessors to review a property before they approve a homeowner for insurance. Or as the Pew Charitable Trust reports, Californians living in a high-risk zone for wildfires may find coverage but have conditions set for their policy to remain active. 

Some of the conditions include wildfire-season preparation, such as regular maintenance of trees and undergrowth on the property. In tornado or hurricane regions, the insurer may require the home to be retrofitted or fortified to wind-resistance standards, or have shutters or other types of protective items installed.

There is no actual guarantee you’ll be insured — you may need to apply to several insurance companies before finding one that agrees to cover you at an affordable price. Once you find a company willing to provide you coverage, be sure to review the “fine print”, such as exclusions, limits and what type of maintenance or management of your property is required to keep your policy active.

If you haven’t purchased a home yet, Wong advises potential homeowners to “take insurance eligibility and affordability into consideration before purchasing a property. This is an area many people miss but can hurt you later on when you have difficulty securing adequate insurance.” 

If My Policy Was Canceled, How Can I Get Insured Again?

If your policy was canceled, you could try to renegotiate with your current insurer to keep your policy in force. You may need to meet additional conditions, such as removing brush or landscaping around your home, for example. If the insurer is unwilling to work with you, Wong’s advice is, “If you are denied a renewal, you can often negotiate yourself a 30 to 60-day window, so you have more time to shop the market and find coverage.” 

If you’re unable to find reasonable coverage with another insurance company, check with your state for special insurance programs. Some states, such as California, have access to the Fair Access to Insurance Requirement (FAIR) plans for difficult-to-insure perils such as fire, flood or wind damage. You’ll still need to find basic homeowners insurance, with the extra FAIR coverage for the hazard you’re having trouble getting insurance for. 

The Bottom Line

Getting home insurance in high-risk areas is getting harder because of the growth in extreme natural disasters and the economic slowdown from the COVID-19 pandemic. You can’t control the weather, but you can take steps to improve your chances of getting —  and staying — insured. They include factoring in the cost and likelihood of getting insurance for a home before you buy and negotiating with your insurer if your premiums go up. Make sure to have one or two backup insurance companies on stand-by if you need to replace your current home insurance.

Featured photo by Jose Edelson / AFP / Getty Images.

About the Authors

Cynthia Paez Bowman is a home and personal finance writer with a degree in International Business and Journalism from American University. She’s written about internet and TV for MYMOVE, Freshome and Safety.com.