What is happening on the homeowners’ insurance market?
As mentioned last week, global climate change is a big issue in some states in the United States.
A couple of states in particular, among which California, is considered the highest risk state for homeowners to live in due to the natural disasters happening increasingly.
This has led to the decision of the biggest insurance company, State Farm, to stop serving customers any new or renewed homeowners’ insurances.
This has lead to many people owning homes in a high-risk area and not being insured. Once these homes get hit with natural disasters, that could lead to impossibly high bills that people cannot afford.
The market has reacted to this decision and it has been announced that AllState, another major insurer, is also halting all services in California.
What is the future of other U.S. states and insurers?
After State Farm and AllState quit their services in California, the question is if they will do the same in other high-risk areas, such as Florida.
Companies need to make money, so the decisions will not fall lightly and it is not expected that all companies will pull out of all high-risk areas, but a precedent has been set now.
The future of other insurers is now unclear, as there are two ways of going about this.
The first way is to fill the gap that the big insurers have left behind and grow in numbers of policies quickly.
However, if the risk was too big for these companies, are the smaller companies even able to provide for the gap?
The second choice is to either do nothing or move away as well. For many local insurers, the latter is no option and they will keep providing homeowners’ insurances in the area.
Many homes will therefore still have options, but they will be more limited and perhaps more expensive.
How can you prepare for these big impact decisions?
The news of these companies pulling away and the precedent it sets is something that has not been seen before. This makes it hard to prepare for what’s next.
One important thing to realize, is that there are still options in your area and looking around for the best homeowners’ insurance company in your state is the first thing to do.
Besides that, it is important to prepare your ‘next move’.
When you switch, reevaluate what you need from your insurance company. Premiums might be higher from smaller companies, so ask yourself what the necessities are that you need.
Of course, paying for damages will cost more if you are uninsured, but every insurance is a risk-reward type of deal.
In the case of California, the state has announced that it will look into other possibilities to help out citizens who will be harmed by these decisions and might get into trouble.
Keep your local news in check and make sure you are up-to-date on the latest legislations and bills that are coming out. If you can make use of any of these, you should.