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Thousands of Los Angeles homeowners were dropped by their insurers before the Palisades Fire
(www.cbsnews.com)
Perhaps the most interesting part of the article:
this post was submitted on 11 Jan 2025
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Insurance should really always be available at some price if you don't cap prices. It might be ludicrously expensive if insurers consider the area to be extremely risky -- and this area has had serious wildfires in past months and years, and I'm sure is probably considered to be quite risky -- but there's going to be some price at which they should make a return, even if they think that there's a pretty good probability that the house is going to burn in some kind of fire in the next N years.
i kinda disagree. no business or government should be required to provide insurance just because you built a structure.
some things can just be not insurable.
If there was no cap on insurance, the market would absolutely fix the “uninsurable” problem. It might cost $90k a month to insure your home, but since they fully expect it to burn down in a few months, they’re likely to take a loss on that insurance.
Yeah. Insurance is for unexpected disasters. Building a house in a wildfire zone, tornado alley, or flood plain, those disasters are expected.
The challengee is (at least) two-fold: (1) existing homes that were once not in wildfire zones are now in them due to climate change, (2) some of the reason building is allowed into fire zones is to alleviate housing availability.
I'm not saying that offering insurance to a given property owner should be mandated, but that there's always some price at which providing insurance is worthwhile to an insurer.
Like, say State Farm's model predicts -- as it probably correctly did here -- that a house is most likely going to burn in the near future. Say the next two years, on average. Your annual fire insurance might be half the rebuild cost of your house, but they can still offer it, even at those levels of risk.
Tell that to the banks that won't give you a mortgage loan without insurance.
Tell them what? Banks should not be offering mortgages on homes that are at to much risk to be insured. People simply should not be living in areas where wildfires are a near certainty.
If you don't cap prices on something the insurer is expecting to be destroyed, wouldn't they just set the price of the policy to be the price of the thing it insures, effectively making it worthless?
It most likely would just be a significant portion. Once a place is hit by fire, it takes a couple of years to be as susceptible again. Or, if it's not been a recent hit, the odds of any individual place being hit in a given year is probably sub 25%.
So the insurance company would probably charge something like 20-25% of the value. Which, yes, is hugely unaffordable for 99.9% of people. But if you're super rich is probably still worth it, as the reason the price is that high is that there's a pretty good chance your house burns down in the next year or two, so you would come out ahead in that scenario.
Then again, once you're rich enough to afford that level of insurance premium, you're probably rich enough to just float the risk yourself. So yeah, probably pretty worthless across the board, even at levels fairly significantly lower than 100% of the replacement cost.
It'll go up, sure. There's nothing magical about the price of the property, though, as a line for making insurance worthwhile. You pay an annual rate, and an insurer will just expect that whatever you're paying over the will pay for the cost of the property within the period of time until they expect the property to burn on average.
If it's a hundred years, it might be -- discounting, for simplicity, the time value of money -- 1% of the property value annually. If it's six months, it might be 200% the value of the property annually. The 100% mark isn't a special line in terms of insurance making sense.
It'd certainly make the property more expensive to own as that percentage goes up, but that's true whether you insure it and spread that risk over many houses or don't insure it and pay for the loss of the thing yourself.
Isn't it though? If my choice is to pay 200% of the value of the property annually or to not have insurance, why would I opt to have insurance? The best they could do is pay out less than I paid them.
Say I plan to sell the house in three months and want a three month term, maybe.
What you propose is illegal in California. It seems like a mildly counterproductive law, but I can't imagine it would make much difference if they were allowed to offer policies nobody can afford anyway.