How the West Coast Wildfires Will Affect Home Insurance Costs

The Team
The Team

As Americans watch the West Coast flame across the news, many are wondering when the damage will stop. Homeowners can do some things to prepare for how wildfires may affect their homes, but they may be surprised by some of the indirect consequences. 

Unfortunately, even after the fires are contained, some homeowners may have to worry about insurance factors. Homeowners concerns’ regarding wildfire damage include the potential for increased rates, the risk factors for their specific region and the costs of those premiums if they do increase. 

Will Home Insurance Rates Increase Due to the Wildfires?

With growing fire dangers on the West Coast, many homeowners are wondering if their homeowner’s insurance rates will increase. The short, and frustrating, answer is ‘it depends.’ 

In states like California where regulations prevent insurance companies from setting premiums based on predicted damages, insurers must set rates based only on the history of damage in an area. This means that if you are experiencing new fire danger this season, your rates are less likely to seriously increase than if you live in a city with a history of wildfires. However, if your area has been endangered in the past, you may see an increase in your premiums. 

[ Read: The Cheapest Homeowners Insurance Companies ]

Homeowners aren’t the only ones affected by fire damage, and as these superheated disasters continue to rage, insurers are also experiencing losses. To offset the increasingly expensive payouts in risky areas, insurance companies may need to increase rates.

Washington-based insurance consultant Grant Robinson explained that home insurance premiums are based on numerous factors, of which fire danger is only one, but that “occasionally there will be coverage holds that could prevent homeowners from getting insurance if they live in an area that is extremely high risk.” If you do live in one of those high-risk areas, make sure you’re covered by the best home insurance for your specific region.

What Areas Are Most at Risk for Increased Home Insurance Premiums?

It’s no secret that some areas on the West Coast are more at risk than others due to their history of wildfires. Repeated, devastating wildfires in California have left whole communities destroyed, and as a result of the widespread damage, many insurers are struggling to afford the claim payouts that homeowners desperately need.

In the most recent installment of things going wrong in 2020, those fires have also worked their way up to Oregon and Washington. Many homeowners along the West Coast are left wondering how their insurance rates will be impacted. 

Communities that have experienced repeated wildfire devastation year after year are more likely to experience increases in insurance premiums because insurers need to cover the cost of the payouts. Since your insurance rates for your home will be based on the number of claims in your area, you may experience more (or less) of a change than your friends and family in another part of the state. 

Although these premium costs may seem arbitrary to the average homeowner, insurers have a process for calculating premiums. Robinson explained that  “there are several factors involved in determining premiums, but there is usually a formula used to calculate rates that will include the risk or claim history of the zip code.”

Your insurance company will use some sort of formula to determine rates for your specific area. Call your insurance agent and have a conversation about the effect of the wildfires — depending on the fire history in your neighborhood, you can determine your risk of rate increases.

Ways To Offset Higher Home Insurance Premiums

If you do live in an area with repeated wildfire danger, you may see an increase of your home insurance premiums in the future. Luckily, there are things you can do to offset rising home insurance rates if you’ve been affected by the fires. 

  • Shop around for the best home insurance and keep in mind that some insurance companies offer better coverage based on region. You can save yourself money by investing your time in comparing quotes from several insurers. 
  • Buy the right insurance for your needs. Understanding exactly what insurance you need to buy can help you to save money by only paying for what you really need. 
  • Plan ahead for potential disasters and take the steps to protect your home from extreme weather. Some communities are especially vulnerable to weather-related events, but there are steps you can take for your protection. 
  • Take advantage of discounts if you haven’t already by bundling policies and checking into other savings that you may qualify for through your insurer. Alternatively, look into the discounts offered by other insurers and consider switching if you find a better deal. 
  • Look into companies that give back. With more people working from home, there are fewer cars on the road, which means fewer accidents and less money paid out in claims. Some companies like State Farm are giving it back to their policyholders. 
  • Consider moving to a less dangerous area if the costs and the risks outweigh the benefits of your current zip code. 

The Bottom Line

The wildfires on the West Coast may affect homeowners insurance in areas that have been subject to repeated fire damage; however, if you are experiencing fire danger for the first time, your premiums may stay the same. Some companies can offer you more support based on your area, and it’s in your best interest to check into your policy and make sure you are getting the best coverage for your needs. 

Featured image by Justin Sullivan/Getty Images.