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

[bcla]

I will have to trust the insurance company on the value because every quote I got was about the same level of insurance. Area is not prone to natural disasters, townhouse was built in 1998, walls are thick enough between units that I never hear any noise from either side. I can’t imagine any piece of land this close to Washington DC going down in value. Before we moved here I was used to single family homes that the insurance replacement value was somewhat higher than the current value.

My insurance policy's stated dwelling replacement limits are maybe 40% of what my house appraises for. But there's also lost personal property, other structures (like fences, sheds) and loss of use (temporary rent?). I'm not going to give specific numbers about the value, but I will say the policy has a $500,000 personal liability limit and an $89 annual premium for that. But that's tiny compared to the rest of my premium.

 

[Mirabell Rose]

Now that I'm thinking about these people that self insure, I had another thought. What about liability insurance? We have insurance on our vehicles and home and also an umbrella policy. We live in a 4 season climate. What happens if there is ice and the delivery driver slips and falls on our walkway? I'm assuming initially the company, UPS/Fedex/Amazon (if an actual employee vs contracted worker) covers their medical bills. But I'm assuming the company's insurance is going to come back to us for the liability for not having a safe path for them to access our front door. There is a good possibility depending on the severity of a fall, the driver could become paralyzed. That would wipe out everything most people have. As I'm assuming the folks that have millions upon millions are not choosing to self insure. I'm thinking it's the average upper middle class family whose home is paid off and looking to save a little bit each year.

On a side note, we do immediately do snow/ice removal for the drivers, keep lights on when they deliver at night, etc. But you never know what could happen. In a sue happy world, they could just trip without any obstructions and likely there is a way we were negligent.

Our state has a law that you can’t sue a property owner for slips and falls due to weather related things like snow and ice. Not kidding.

 

[EACarlson]

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?

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?

Who is the state or federal government going to sue? The insurance companies for making legal business decisions in a very heavily regulated industry? If the Arson reports are true, I'm sure some will be suing that guy but I wouldn't expect to see much.
The reason that many were dropped in California is because the insurance companies decided they needed to raise rates a certain amount in order to cover their expected exposure, the state government wouldn't allow them to, so the insurance companies stopped offering the product. As a partial owner in one of those companies, I've had State Farm for 15 years, I appreciate that.

 

[slo]

I voted yes, but then we would nothing left for retirement.

 

[RedAngie]

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.

There are plenty of modest homes and even modest neighborhoods in Pacific Palisades. Even in the uber-weathly areas there some older smaller homes that have been in the same family for many decades, not torn down to build ostentatious mansions.

Granted, due to location, location, location, those modest homes can be sold for a few million, but it’s not like the owners are swimming in excess cash. Rebuilding will be a struggle or financially impossible.

 

[MillauFr]

It may have changed now because times have changed with housing but when I worked at the insurance company high value homes in every state they wrote in were ones with a replacement cost of $1million or more. It had higher inspection requirements for one such as interior photos required. In California a high value home was $2million or more and that was the only state that it was considered that. Nothing different in that respects with CA just that housing would cost more.

Aren't many of those $2m houses in California really no different than a $300k home in a low cost of living area? Biggest difference is they are sitting on land that is worth $1.7 million.

 

[EACarlson]

Aren't many of those $2m houses in California really no different than a $300k home in a low cost of living area? Biggest difference is they are sitting on land that is worth $1.7 million.

Kind of but not really. The land value does make a difference but low cost of living locations have lower costs for just about everything. Labor is cheaper, materials are cheaper, different materials are allowed. Without the land costs, what it would take to build a $300k house in my hometown would probably take $700k in the LA area.

 

[Minniesgal]

I think you'd be amazed what you can make work if you really really had to. I suspect we would manage we would still own the land and could rebuild smaller simpler as we are empty nesters.

 

[Minnie1222]

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.

The "rich" are also the biggest private donors to the relief funds that may aid these evac centers.
What's wrong with people staying at hotels? One person at a hotel means an extra bed at the evac center. If the vloggers think it's unfair for some people to sleep in these centers then go ahead and pay for their lodging then.

 

[Mackenzie Click-Mickelson]

Aren't many of those $2m houses in California really no different than a $300k home in a low cost of living area? Biggest difference is they are sitting on land that is worth $1.7 million.

Size of the home is probably the bigger thing as in in CA (and that considers even northern CA) you'd be more likely to get a small house size for the amount of money you spent but having looked at the interior photos enough of homes there's not a whole lot difference if you're talking about $2 million homes vs $1 million dollar homes elsewhere. I just got a real estate flyer for my neighborhood from one of the residents that is a major real estate agent and the average new construction in my neighborhood is $890K, that would probably be several million in CA despite not being a super big difference.

 

[Mackenzie Click-Mickelson]

Kind of but not really. The land value does make a difference but low cost of living locations have lower costs for just about everything. Labor is cheaper, materials are cheaper, different materials are allowed. Without the land costs, what it would take to build a $300k house in my hometown would probably take $700k in the LA area.

CA has a wacked up housing market and has been that way for decades. They are just overpriced. The land costs in CA is just wrapped up in their wacked up housing market. If you're talking about $5+ million well those are a different category.

Labor costs they might charge more for doing work. On the other hand for materials in CA they can be better off than a decent amount of places especially the middle of the country where it takes longer to get materials usually by truck and train, not to mention labor is usually harder to come by in the middle of the country. This is the same for other things like cars (which tend to take a bit to get from the coasts to the interior of the U.S. both in transit time and popularity). I remember when we were looking at cars in spring 2021 the local Mazda dealership had a boat full of them stuck off the coast of Long Beach during their port issues, but it was going to take weeks to get to our metro even after that was resolved as they had to ship them by train. Luckily my metro has the largest train transition place outside of Chicago.

As for what is allowable in materials that's an over exaggeration that in no way explains why housing costs are just so unreasonable in CA compared to many other places. CA isn't really that different.

In my metro (split between two states) labor is often shared amongst the main builders and when we were building our house in 2014 the labor was still at a slight shortage due to the 2008 Housing market bubble (which is why the market was in a buyer's market at that time). At that time the average build for a home in my side of the state line was 7 months and on the other side of the state line 6 months this was a tiny bit longer than under normal labor conditions. The additional month for my side of the state line was due to additional code and inspection requirements that are stricter in my state than the one next to me. Now during the lumber shortages during the pandemic that obviously affected it and new homes were on average 14 months to build on my side of the state line. It's lower now but I don't believe it's back to 7 months.

 

[china mom]

I would be emotionally devastated but not financially.

On the issue of insurance companies dropping coverage, like others have stated upthread, it wasn't sudden and wasn't without reasons. There were other options for insurance coverage.

When we bought our beach condo 25 years ago, State Farm, which does operate in the same state, would not offer us coverage despite us being a longtime customer with current home and auto policies. We ended up with a policy that was underwritten by Lloyds of London.

We sold the beach condo and bought a townhouse in Orlando. By this time, we had four other homeowner policies and four car policies through State Farm but they were no longer writing new policies in Florida so we are insured through someone else.

Its all good. From a purely business sense, I would prefer they avoid issuing riskier policies and keep my other policies affordable.

 

[MillauFr]

Kind of but not really. The land value does make a difference but low cost of living locations have lower costs for just about everything. Labor is cheaper, materials are cheaper, different materials are allowed. Without the land costs, what it would take to build a $300k house in my hometown would probably take $700k in the LA area.

If the materials were far cheaper in Phoenix, wouldn't the builders just buy them there and hire a truck to drive them to LA?

 

[MillauFr]

CA has a wacked up housing market and has been that way for decades. They are just overpriced. The land costs in CA is just wrapped up in their wacked up housing market. If you're talking about $5+ million well those are a different category.

Most of it is land costs. As you also said most of the materials are imported into the Port of Long Beach. Shouldn't the cost of those materials be the same or cheaper in LA than they are in Kansas City?

I guess you can make the argument that they charge more in LA because people have more money there. There is some truth to that. I couldn't believe that Washington apple cost way less in a Minneapolis grocery store than I pay in Seattle for them.

 

[georgina]

My insurance policy's stated dwelling replacement limits are maybe 40% of what my house appraises for. But there's also lost personal property, other structures (like fences, sheds) and loss of use (temporary rent?). I'm not going to give specific numbers about the value, but I will say the policy has a $500,000 personal liability limit and an $89 annual premium for that. But that's tiny compared to the rest of my premium.

Yes, I was talking specifically about the physical dwelling. Personal property is usually calculated as a percentage of that I believe, and for us is usually ridiculously high because we do not invest in high-cost furnishings. We have an umbrella liability policy covering our home and auto. Even here where our car insurance rate stayed the same last year the homeowners went up 25% with no claims.

 

[snappy]

I answered yes, we could absorb a total home loss. Our lot is valued fairly high, but we were conservative in picking a reasonably modest floor plan when we built the house in 2023, and we stuck with upgrades we deemed necessary and were relatively affordable. We have relatives and friends not in our area who we could stay with while figuring out how to recover. Our current and previous homeowners insurance policies has/had a very generous loss of use benefit as well to cover temporary relocation costs. I am not sure whether insurance companies would still honor loss of use or not if they cancel coverage. Regardless, there will be a ton of lawsuits over coverage. I have witnessed many catastrophic situations over my lifetime living near the gulf coast, and my dad was a commercial loss regional claims manager for one of the top US casualty insurance companies for decades. I still remember the stories he told me about a few of the big claims for Hurricane Camille in 1969.

 

[bluezy]

I voted yes, but it's only because we've saved aggressively for retirement over the last 30+ years. We would definitely build a smaller home as all of the kids are adults and only one still lives at home (sophomore in college). We don't need 6 bedrooms and 4 bathrooms anymore and while we can live on one floor in our current home, we would build something that is only one floor. Doing a housing downsize and replacing our belongings would still probably eat up about 25% of our retirement funds. We'd survive, but we wouldn't be living the retirement lifestyle we have saved for and DH most likely wouldn't be retiring at 55 as planned.

 

[Neapolitan Ice Cream]

I'd need to fall back on insurance.

 

[Bad Pink Tink 2.0]

An update from Eaton Fire - Virtual Community Meeting 4pm Sunday 19 January.
It has been officially confirmed that all property which needs to be rebuilt will be assessed under Proposition 13.
This is an amendment of the Constitution of California enacted during 1978, by means of the initiative process, to cap property taxes and limit property reassessments to when the property changes ownership, and to require a 2/3 majority for tax increases in the state legislature. It means that if a house or property was valued at $500,000 before the fire, the rebuilt house or property will be valued at $500,000.

 

[Cogswel_Cogs]

I guess it could be even more costly to some of the wealthier even if they have insurance.
I am assuming that the insurance only covers replacemnet cost of house and items.
So say you bought a house for $30 million, and the cost to rebuild the house and itmes is $4.5 million. But the value of the land has fallen $10 million. Are they out $10Mil.