Homeowners insurance is a big problem and I don’t think it’s on everyone’s radar. I first wrote about the problem a year ago on my blog where I stated insurance was more costly and difficult to obtain, but entirely doable with persistence. I’m afraid it’s gotten worse. 

While devastating fires seem to be an annual norm to the north and south of us, here on the Monterey Peninsula we have avoided a large fire since the Sobranes Fire in 2016. This fire burned 57 homes and 132,127 acres, mostly wilderness land in the Los Padres National Forest and Ventana Wilderness. And before that, the Morse Fire in Pebble Beach, which broke out on May 31, 1987 and consumed 31 homes and 160 acres primarily in upper Pebble. Both fires started from an illegal campfire. 

One local insurance broker recently told me the best thing for a buyer to do was to buy a house near the coast! Although said in jest, you certainly don’t hear of fire insurance problems in Pacific Grove, known for getting the most fog. Carmel-by-the-Sea is also still a relatively easy place to obtain fire insurance. Interestingly, the city is just now re-writing their design guidelines to be more lenient around wood shake roofs, wood windows and cottage style architectural, which has been the status-quo for years. But get outside of the 1.08 square mile city limit and you’re back to a high fire zone. 

The hardest places to obtain insurance on the Monterey Peninsula seems to be Upper Pebble Beach, Jacks Peak and Monterra. Buyers for a $5M home in Monterra just obtained an annual premium quote for $130,000! 

When you apply for insurance, the property is assigned a FireLine score. The scores range from 0-30 and assess three critical risk factors. One, how dense the brush / trees / grasses are around the property. Two, the slope of the grade as a stepper slope increases the speed and intensity of fire. And three, how easy is the property to access by fire equipment. The highest score I have heard of locally is 15, behind Carmel High School which backs up to Hatton Canyon, a 10 acre urban open space that runs parallel to Highway 1. For perspective, most mainstream insurance carriers only write policies with 100% coverage for homes with a FireLine score between 0-3. 

In Jacks Peak, for instance, people who have lived there, and carried insurance for years have been told their policies are being cancelled. While exceptions may be made if clearance and roofing materials are excellent, coverage comes at a price and no guarantee that price won’t increase in the future or worse, be canceled. And what if these property owners have a loan? That note becomes due immediately without insurance. 

Many people turn to the California Fair Plan as an act of last resort. But this plan only covers properties up to 3,200sf and a maximum coverage limit of $1.5M. We have been told and remain hopeful that the California Fair Plan will open up coverage to larger homes this summer. Fingers crossed. 

Current homeowners in certain high risk zones are starting to wrap their heads around the probability of going self-insured.

My listing at 59431 Garrapatos is an interesting example of a homeowner choosing to be self-insured. I’ve been told that insurance could be obtained for this location, but the owner has built what he considers to be a fire safe building and has opted not to pay for the coverage. Maybe others should take note? At Garrapatos, all the wood used in construction was dipped in vats of No-Char and the 1st layer of plywood sheer panels, after being dipped, were painted on the outside with 320 to reduce fire risk. 4’X8’ concrete Hardie Panels were then used to cover and strengthen the plywood adding another layer of fire resistance. He also has two fire hoses at the house, a sprinkler system inside and out, even under the deck, and a foam system that upon activation, discharges fire suppression foam around the house. 

Additionally, I have a new listing at 4085 Segundo at the mouth of Carmel Valley. This property is a brand new build and was constructed in accordance with the Wildland Urban Interface, or WUI, codes and standards. 

The effects of these insurability challenges will certainly be felt for large homes in high risk zones. Buyers will demand a lower price in exchange for this risk. And more likely, buyers will simply avoid these areas. Demand for the coastal communities may increase. But for local families, Carmel-by-the-Sea is already an expensive option. 

Make obtaining reasonable fire insurance a contingency in your offer and look into your options even before you put in an offer. 

Many of us in California go without Earthquake Insurance, will fire insurance be next?