Could your household absorb a total home loss like is happening in Ca because insurance cos were permitted to suddenly drop fire coverage?

[LuvOrlando]

As I watch the videos of people who lost everything I am considering how many people could manage this happening to them. It is awful it was permitted, I wonder if the state can sue them now or if the Fed can sue to recover what will be paid?

My household could not absorb such a thing, how about your household?

I watched insurers start doing weird things during 2020, in Florida first I think, then other states, I didn't hear about fire coverage in Cali until the fires. I have been reading complaints about people getting randomly dropped without being given a reason in places like Nextdoor. I wonder how big the problem really is?

 

[dreamer17555]

I do not think anyone on disboards could withstand the blow of losing a home after being suddenly dropped by insurance.

 

[guy_incognito]

That's a hard question to answer.

A person living in a place where 99% of the value is the land has a better chance of recovering than people living in a place where the value is in the building. Does that make sense? Sadly, a result of this disaster will likely be sky-high land prices and residents will need to sell to survive. They will be okay. This is a unique situation and most folks around the country would definitely be ruined because even selling the land wouldn't net them enough proceeds to carry on.

 

[Southernmiss]

As I watch the videos of people who lost everything I am considering how many people could manage this happening to them. It is awful it was permitted, I wonder if the state can sue them now or if the Fed can sue to recover what will be paid?

My household could not absorb such a thing, how about your household?

I watched insurers start doing weird things during 2020, in Florida first I think, then other states, I didn't hear about fire coverage in Cali until the fires. I have been reading complaints about people getting randomly dropped without being given a reason in places like Nextdoor. I wonder how big the problem really is?

There were total losses in Hurricane Katrina in 2005 not covered by insurance.

This has been going on for years in other disasters, the fires losses, sadly, are not new.

We had a Congress person pushing for national all perils insurance in the years after, but he got nowhere with it.

 

[gottalovepluto]

Of course most households can’t take a financial hit like that. C’mon. Why they didn’t chose to buy the expensive but limited coverage last resort state insurance is a question those uninsured households will be asking themselves the rest of their lives. And a question anyone in a potential disaster area should ask themselves now. If you can’t afford to lose it, you better get even crappy expensive insurance.

Insurers did not “suddenly” drop coverage. They’ve been negotiating with the state of CA who says how much they are or are not allowed to raise insurance prices. It felt sudden because people bury their heads in the sand and ignore such things until they get a notice in the mail they’ve been affected. CA would not allow them to raise rates as much as insurers said they needed to raise due to how risky it was getting. Insurers started leaving. Genius move in retrospect and insurance companies that cancelled policies should be forever grateful to the CA Insurance Commisioner for pushing them to that point.

Fun fact- when the state fund is unable to cover these huge loses (a number of people did have state coverage) and the insurance companies have to chip in the insurance companies have a cap, and then every homeowner in CA will be assessed special insurance taxes to cover losses beyond that. The government in CA is trying to look into issuing bonds to prevent taxing all other homeowners in CA for this.

 

[kdonnel]

Did any insurance company actually just remove fire coverage while keeping a policy in place?

It is my understanding that companies opted to not renew policies and reduce their exposure because their actuaries could see a danger to the company in the future if they continued to provide insurance to the same number of homes in the area.

I understand that rates rose dramatically with the insurance companies that remained but seems like the homeowners who opted to go “bare” rather than pay the new rates knew what the outcome of that decision could be.

I had a family member who owned several water front homes in and around Tybee GA. Since the homes were all owned outright and did not have a mortgage company requiring insurance he opted to go bare and self insure. His risk tolerance level paid off and none of the homes suffered a loss that would have been covered by insurance before he passed. He saved in excess of $100,000 in premiums. The family members who inherited the homes all opted to buy insurance.

 

[LuvOrlando]

There were total losses in Hurricane Katrina in 2005 not covered by insurance.

This has been going on for years in other disasters, the fires losses, sadly, are not new.

We had a Congress person pushing for national all perils insurance in the years after, but he got nowhere with it.

Was that the same thing though? Not being sarcastic. I really thought that was different because policies never have rising water type coverage which is why flood insurance is mandated. More recently, the insurance companies have been withdrawing policies on a whim it seems leaving un-expecting homeowners liable. Katrina was more a matter of fact while this seems more a calculated withdrawal from risk.

 

[OrangeBirdGirl]

I'm thinking most that could cover an entire loss would have their long term financial objectives change. Regardless if you are working or retired, you are likely taking a large chuck out of your retirement savings. But, then again, if we choose to self-insurance, I know with our next house and processions it would be downsizing. Not necessarily because of money, but because we just accumulate so much stuff we don't need.

I don't completely understand this whole insurance thing with what happened in CA. I don't know if people's policies stated they have coverage and now they aren't covering it? If that is the case, then I sure hope there is some backing to get everything right with them. But if their policies were canceled and they chose not to renew, then that's on them to assess their risk level to something like this.

 

[bcla]

It's not impossible to get home insurance coverage in California. I would say it's pretty easy. The key question would be "How much?" I remember when my insurer just kept on raising the rates and I managed to switch to a new one that charged hundreds less. I know someone who forgot to pay a renewal and the policy was cancelled. They also wouldn't reinstate the previous policy - possibly one of the insurers that said no more new policies in California. After shopping around for insurance, I think it went up a lot. But the house was paid off, so they could have just gone without homeowners insurance.

If a home is mortgaged, the lender will almost always require that the home be insured. If they get notice of a policy cancellation, they will even take out insurance themselves, and it won't necessarily be at a competitive rate.

And I guess it could be worse. I won't name the state, but I think most here know which state has the most horrendous homeowners insurance situation, and it's not California.

The biggest home insurer in California is State Farm, and they won't issue any new homeowner policies in California for the time being. I'm not sure how that affects their agents, who apparently aren't allowed to sell other companies' insurance like most insurance agents. Maybe they're allowed to sell other homeowners insurance now since it wouldn't be in competition with State Farm given then don't issue new California policies. They also operate as State Farm General, which has completely separate policies, liabilities, and reserves only for California. This was a deliberate decision years ago. There's talk that the parent company might step in because the reserves might be fully tapped, because of the LA County fires, and they don't want to go to reinsurance to pay claims. If they tap reinsurance, their reinsurance rates will likely go up, but they're not allowed to pass reinsurance costs on to their policy holders in California.

 

[bcla]

There were total losses in Hurricane Katrina in 2005 not covered by insurance.

This has been going on for years in other disasters, the fires losses, sadly, are not new.

We had a Congress person pushing for national all perils insurance in the years after, but he got nowhere with it.

Depends on the place. I get that with lower home prices, homes might be paid for and the homeowner might consciously decide to go without insurance. Not as likely in California though, where most homes are mortgaged - primarily 30 year and they almost always require that there be homeowner's insurance at a minimum level. The lender has to be listed on the policy.

Still - the value in terms of land vs improvements was noted. While the cost of construction might be higher in California because of higher labor and material costs, the value of land is typically way more than the value of the improvements (i.e. buildings). A $1.5 million home in California might only cost about $300,000 to rebuild, although the value of the improvements might be more. A similar $400,000 home in another state with lower land values might cost about $200,000 to rebuild.

 

[NaptownMom]

Well, yes. We could. We are in a very unusual situation where we live FAR below our means in terms of housing. We bought our house 10 years ago for what is now 1/2 our annual income. While building costs have certainly gone up in our region, we have enough money liquid that we could pay cash to rebuild.


But even very wealthy people rarely have the eccentric balance we have, of living in so modest a house relative to our income. People are sort of dismissive of the Palisades residents’ level of loss because they have high net worths… but most wealthy families have a significant majority of their net worth in those opulent homes.

 

[Bad Pink Tink 2.0]

Just thought I'd pop in and share some of the YouTube Vlogs Ive been watching

Family in Altadena, mom, dad and 13 year old daughter. Started filming when the power went out, making dinner with a light hooked up to a power bank, updates through the night as the fires got closer and then they evacuated. Came back the next morning and their neighbourhood was levelled, their house just a pile of smoldering ash. The dad unable to speak as he looked at the ruins of their home, the sobs of his daughter heard in the background. They are in an AirBnB as they figure out what to do

A guy from Altadena who was in Vegas for work, got updates while he was working and got his friends to go save his cats. He drove back from Vegas the next morning to find his neighbourhood was levelled, his house just a pile of smoldering ash. He had a mortgage, which he still has to pay back over the next few years, even though his house is gone. He is staying with friends.

Ive also seen a list complied by people from Altadena of Go Fund Mes set up for people they know whose houses are gone. The names on them is heartbreaking xyx grandma xyz grandpa abc family. There was almost 200 names on the list a few days ago, I'm sure there is a lot more.

The rich and famous people of Pacific Palasades will be fine, they will shout and make noise they will get the insurance money and rebuild or move away. Yes they are suffering emotionally and mentally, but financially they will be fine. Shutters On The Beach in Santa Monica has become a hub for the rich displaced, while the people of Altadena are camped out at The Red Cross Evacuation Center at Pasadena Convention Center.

 

[tvguy]

Hope never to find out. My initial reaction is no, but actually crunching the numbers, it could be done. We'd have to get a 30 year mortgage, and the payment would take about half our Social Security payments each month. But we could live on the remaining money. I know that because until a year ago, that IS how much we were living on our first two years of retirement. We only started drawing Social Security in 2024. The biggest impact would be, when we are gone, our kids would not inherit a house without a mortgage.

 

[bcla]

Well, yes. We could. We are in a very unusual situation where we live FAR below our means in terms of housing. We bought our house 10 years ago for what is now 1/2 our annual income. While building costs have certainly gone up in our region, we have enough money liquid that we could pay cash to rebuild.


But even very wealthy people rarely have the eccentric balance we have, of living in so modest a house relative to our income. People are sort of dismissive of the Palisades residents’ level of loss because they have high net worths… but most wealthy families have a significant majority of their net worth in those opulent homes.

The remakable thing is that a lot of people hear the name "Pacific Palisades" and think that people are either living in mega-mansions or super high end beachside property. Steve Kerr is head coach of the Golden State Warriors and grew up in Pacific Palisades and went to Palisades High School (before it turned into a charter high school). His parents bought the house in the late 1960s and it's a fairly ordinary home purchased on an academic's salary. Here's a photo of his mother in front, before it burned down.

 

[Minnie1222]

The remakable thing is that a lot of people hear the name "Pacific Palisades" and think that people are either living in mega-mansions or super high end beachside property.

I'm disgusted with the attitude on social media towards Pacific Palisades. I bet the majority of these sick people have never been near the place and just echoing something they've never experienced.

 

[bcla]

I'm disgusted with the attitude on social media towards Pacific Palisades. I bet the majority of these sick people have never been near the place and just echoing something they've never experienced.

Sure. I've been through Pebble Beach, California before. Sure most people think 8000 ft homes on a golf course, but most homes in the community are modest 2-3 bedroom homes.

Many of these places sound rich because there are pockets of mansions and uber-expensive Some are fortunate to have bought in before the prices spiked, and if they they lost their homes it can be devastating to a retiree on a limited income.

I looked it up, and the median family income in Pacific Palisades is less than $200,000. I suppose that sounds like a lot, but there are also a lot of really rich people who bring up the average income.

 

[Minnie1222]

The rich and famous people of Pacific Palasades will be fine, they will shout and make noise they will get the insurance money and rebuild or move away.

Yes, they will be fine. I pray they will return and build massive fireproof mansions on the Palisades, because large mansions employ a larger group of people.

 

[kdonnel]

The remakable thing is that a lot of people hear the name "Pacific Palisades" and think that people are either living in mega-mansions or super high end beachside property.

When I think of California, I think of people living in homes like mine in size and finish, only they cost 3-5x more.

So I expect there to be lots of people in about the same financial position I am as far as savings and retirement but they live in a home costing between 2 and 3 million because that is what is costs to live in a similar home.

They are in no way rich because they live in a 2 - 3 million dollar home. The are solidly middle class just like me just living in an area with a higher cost of living for the middle class.

 

[StitchesGr8Fan]

They weren’t just dropped from their provider out of the blue. They weren’t renewed when the policy was up. That is very different.

Insurance carriers take calculated risk with what they will insure and for how much. They look at the likelihood of a loss, what they will have to charge to cover the anticipated losses and still make a profit. They have determined that California has a very high risk of losses and were not allowed to raise rates high enough to cover everything and keep their profit margins. Therefore they decided to stop covering customers when their policy was up.

 

[Praying Colonel]

I voted "other" because there's no way I'd own an uninsured home, much less own one in an area prone to wildfires. I'd get it insured or I'd sell it.