Dear Deanne,
Thank you for your timely question about today’s insurance marketplace, especially in more wildfire-prone areas. What you are experiencing is the reduction of the supply of insurance and the limited interest of standard insurance companies to expand their writings in wildland or adjacent areas. In many respects, the multi-family units are even more distressed as insurers realize that “on average” they are largely unprofitable even in non-wildfire areas. Bottom line: you are likely finding the procurement of replacement coverage difficult.
What can you do? Your first step should be to seek the help of an insurance agent who represents multiple companies, lives and knows more specifically the wildfire risks in the area, and has access to the Excess & Surplus (E&S) lines marketplace. Agents in this arena can access another tier of companies that accept higher-risk properties. In many instances, these agents will likely be able to procure replacement coverage but with higher premiums and, in most instances, with less additional coverage than traditional standard policies. Independent agents may still be able to get you HO-6 type policies unless your condo is in a highly exposed area. If this course of action fails, your agent should be able to advise you whether your state has a FAIR plan that is designed to pick up customers who are unable to procure coverage.
How should you handle your mortgage company? If the above course of action fails, mortgage companies usually can “force place” coverage which protects them at very high prices and charges them back to you. You need to be as proactive as possible to find coverage preferably in the E&S marketplace that protects both you and the mortgage company even though this will likely be a difficult task. Why have the mortgage companies not been more proactive on this issue, I suspect that until the last couple of years this issue has been an isolated situation. I understand that they are now hearing similar stories as yours from their customers located in natural catastrophe-prone areas. Sadly, the number of property owners facing situations like yours is growing, so I do anticipate that mortgage companies, their regulators, and legislators will become more involved with finding solutions in the longer term.
Bottom line: you are not alone with this issue. The best next step is to find an agent who has been successful in helping folks like you.
