Navigating Homeowners Insurance Challenges in California

 As many of you know, securing homeowners insurance in California is becoming increasingly complex. Homebuyers are often caught off guard by the number of hurdles they face during the process. With many insurers non-renewing or declining new policies, it’s crucial to navigate these challenges carefully to ensure smooth transactions.

What’s Happening?

Currently, insurers are tightening their criteria. Factors such as fire hazard zones, older roofs, or previous claims are leading to widespread denials. Given that insurance must be secured before closing, many real estate deals are falling apart late in escrow when buyers cannot finalize their insurance coverage.

Best Practices for Agents

To avoid insurance-related surprises, here are some key strategies to consider:

1. Don’t Rely on a Quote Alone: Make sure your clients’ insurance policies have been fully reviewed and approved by underwriting. A mere quote can change or be denied once the insurer examines the complete risk.

2. Maintain Insurance Contingencies: Never release the insurance contingency without secured coverage. Doing so exposes both your client and the entire transaction to unnecessary risks.

3. Identify Red Flags Early: Be on the lookout for properties that may face insurance challenges, such as those located in fire zones, with older roofs, or with prior insurance claims. Spotting these issues ahead of time allows for exploration of alternative options.

4. If prior water claim history: Be aware that insurance carriers will ask for proof that all the damage has been repaired and explanation as to how further claims have been mitigated. This is something you would want to secure from the seller. In addition you may ask the seller to install a whole house water leak detection device (i.e. Moen) to show that prevention was initiated.  Some carrier are requiring this device regardless.

 As always, my agency is here to help you and your clients through this challenging landscape. We specialize in proactively pre-underwriting policies and identifying high-risk properties to facilitate a smoother escrow experience.