Insurance nightmares: Homeowners on their worst coverage struggles

California’s insurance crisis became very real this spring for Duncan Brown, president of the homeowners association for an apartment complex in downtown San Jose. 

Farmers Insurance had provided the HOA’s insurance for years. But in March, the company abruptly said it would not renew the policy as part of its pullback from the state. 

An insurance broker searched for a new provider but faced rejection after rejection. The complex ultimately landed with an insurer that’s not regulated by California and an annual premium that increased from $93,997 to $503,462, with less coverage. 

“We were just horrified at the size of the increase,” Brown said. “It was just unbelievable — we expected two or three times more, but not five.” 

Faced with paying upfront, the HOA had to borrow from its reserves. Now the association plans to charge unit owners about $2,000 each to account for the increase. 

“The fact that we had got insurance at all was a relief, but we didn’t have any choice at all on the policy,” he said. 

Brown’s predicament may be familiar to many in California, where insurance providers have issued dramatic rate increases, put a moratorium on new policies or withdrawn from the state entirely. The industry has blamed the en masse retreat on the increased risk of wildfires and other disasters related to climate change, combined with inflation and a regulatory system that makes rate increases slow and difficult.

While the industry’s status as a ticking time bomb is playing out in government, The Standard wanted to get a sense of how the situation is affecting regular citizens. Here are some readers’ stories —  and please share yours in the box below:

Christie Chew, owner of a condo in a four-unit building in San Francisco’s Mission District, said that when Allstate dropped her HOA’s plan, the process of finding a new provider ended up draining both her mental and emotional real estate. 

“It was this whole mess,” Chew said. The process of gathering the documentation from Allstate, as well as maintenance and repair records for the building, and compiling it all for potential insurers took significant time and effort.

“It was a lot of phone tag, and oh, my gosh, it was so stressful,” she said.  

All of the quotes rang in around $10,000 – nearly triple the HOA’s original policy – which would have put a financial strain on the condo owners. But then, by “sheer luck and neighborly help,” Chew found a highly recommended local insurance broker. That broker, Wang Insurance, managed to find the HOA a plan for only a bit more than the old one. 

Cyn Wang, head of business development, said the agency’s phones have been ringing off the hook with desperate folks like Chew who have had policies canceled or not renewed.

“We’re in an unprecedented property insurance crisis in California right now,” Wang said. “It’s having a ripple effect on the accessibility of homeownership in the state — it puts it even more out of reach for many people.” 

While in escrow on a house in the East Bay, Craig Downing has been searching for a provider who will insure the property, to no avail. 

“I can’t find a single CA admitted agency who will write a [policy] for a suburban home in Lafayette,” he wrote in an email. “Not State Farm, Farmers, Mercury, Allstate, AAA, American Family … nobody. Nothing unusual about the house. It’s been insured and owned by the same former owner for 50 years. But suddenly in changing hands, nobody will touch it.”

His only options are an out-of-state insurer or paying $12,000 to combine a FAIR Plan policy with additional insurance. FAIR is the state’s “insurer of last resort,” providing bare-bones coverage. It is  funded by admitted insurance carriers and is at risk of a “meltdown” during a major event, according to the industry. But even FAIR is slow to issue new policies right now, because it’s “backlogged and overwhelmed,” Wang said. 

“Honestly, had we anticipated this much trouble getting simple insurance on our home, we wouldn’t have even gone looking for a new home,” Downing said.

In a similar vein, Sacramento resident Eddie Padilla and his wife are watching a dream fizzle before their eyes. 

Nearly 10 years ago, they decided to buy 40 acres in Placerville, with the goal of eventually building a home where they could grow food, raise animals and live a quieter life. 

While they knew it would take a long time to create that reality, they now face the stark truth that it may never be possible. As Padilla prepared to get a construction mortgage to start building their home, he found it impossible to find an insurance provider.

At this point, he doubts whether he’ll ever be able to afford to build because of exorbitantly priced insurance options. He and his wife are contemplating selling the land and finding a place out of the state.  

“It would suck to give it up,” he said. “But it’s one of those ‘life’s not fair’ kind of things. We’d just have to move forward.” 

Cathy Reaves had a Farmers Insurance policy for her home in Moraga for more than three decades before the provider dropped her this year. A questionnaire from Farmers asked whether she had certification from Wildfire Prepared, launched by the Insurance Institute for Business & Home Safety. She didn’t, but her development had prepared itself through the Firewise program. Still, Farmers dropped her policy. 

After facing several rejections for new policies, she got approved by Progressive by bundling her home and car insurance. 

She feels frustrated with California, the insurance companies and Pacific Gas & Electric, whose faulty equipment caused many of the wildfires that have pushed insurers to raise their rates. Now, in the name of future safety, PG&E is hiking fees for consumers.

“My PG&E bill has gone up about $300 a month, so I’m getting screwed double,” she said. “I’m getting screwed by PG&E raising rates, and the insurance companies are raising rates because of the fires. The consumer is getting screwed both ways here.” 

For Brown, the volunteer HOA president in San Jose, one of the worst parts of the situation is that the apartment’s new insurance policy has both a higher deductible and less coverage than the old one. 

“Effectively, we’re never going to make a claim unless it’s a complete disaster,” he said. 

That means owners will increasingly be on the hook for building issues stemming from their units (such as a plumbing problem that damages a neighboring apartment). 

“It’s a cascade effect of cost,” Brown said. “I don’t know if unit owners fully understand the increased risk.”