The 2020 Fire season was the largest California wildfire season recorded in modern history with a total of 9,639 fires that burned 4.4 million acres or 4% of the states 100 million acres of land and destroyed over 10,000 structures. Sonoma county was most badly impacted by the LNU Lightning complex fire, the fifth largest wildfire in history which included the Walbridge Fire just outside Healdsburg which burned over 55,000 acres.
With climate change experts predicting the recent pattern of devastating wildfires is set to continue, we have to not only face up to the reality of living with wildfires but also protecting ourselves and our homes against them. One of the hardest questions I get asked is whether an area is at
risk from fire. The honest answer, as we learned this year, is that anywhere in California has to be considered at risk. Even Oregon isn't now safe from the risk of devastating wildfires. One useful resource is this map that shows the location of historical fires across the state from 1878 – 2021.
Using the tool, it is possible to select years and then identify the areas that experienced wildfires during those years.
As an owner of a few properties in Sonoma County, there are few things I have taken on board as part of living with wildfires. I have learnt a lot and become super aware of all the things you need to do to protect a rural property from fire including basic brush clearance to changes you can make to your home to harden it against fire. (See this post for details on how to harden your home). The second change I have made is to install a solar/battery.
backup system to ensure that I continue to have power even when then there are planned power outages designed to prevent fires as well as power outages as a result of wildfires (see this post for more details of the implementation costs). Having had a home where the fire came onto the property in the Tubbs fire and came very close in the Kincaid fire, I decided to move into downtown Healdsburg for the time being. That being said, I still plan to live the rural dream at some point. Finally, and this is something that every home owner in Sonoma County needs to get comfortable with, insuring a home is expensive. There is no way to sugar coat it, the high costs of home insurance are a fact of life, along with our high property taxes in California.
As a homeowner and someone who works with buyers and sellers of homes it is very clear to me that insuring homes is more difficult and has
got more expensive in the last couple of years. In 2019, for example, insurers dropped 2,631 homeowner policies in Sonoma County. The good news is that the insurance commission recently issued an order prohibiting companies from cancelling insurance for 1 year for over 150,000 Sonoma County homeowners affected by or living close to the Walbridge and Glass fires. Insurability of homes is also driving decisions on where people look to purchase. It is probably no coincidence that the West County and the Sonoma coast was one of the hottest markets (excuse the pun) in Sonoma county this year as people opted for less risky fire areas.
Insurance Is Reducing Property Prices
There is no question that in certain areas, the wildfires are having an impact on prices. For example, I have just sold 3546 Happy Valley Road in Montecito Heights for $1.05m. The current owner pays an insurance premium of $1,364 per year and has never had a fire insurance claim. I had a
lot of interest in the property and a lot of showings but there were always questions around fire risk and insurance costs. The insurance quote I got was for over $5000 per year. I had one buyer who made an offer and decided not to move ahead because of the cost of insurance. It is not uncommon for sellers to have to provide a discount to cover one or two years of insurance as part of sweetening the deal. If the annual premium is $15,000 - $25,000 per annum this becomes a significant price reduction.
With any property that I am listing, I will work with a few different insurance companies to find the best quote to help market the property. I often recommend Farmers Insurance who are great for properties that have a lower fire risk profile (Fireline score of 3 or less – see below). However, the property on Happy Valley Road had a FireLine score of 9 so Farmers would not insure it against fire. After approaching numerous different insurers, the only quote I could get was $6,934 from Lloyds of London (often considered the insurer of last resort). The good news was that
it was insurable with a regular policy, albeit for a price. The only alternative insurance cover,
which Farmers quoted for, was to take out a FAIR plan policy at a cost of $3,623 per year to cover all fire related claims and then take out supplemental insurance policy at a cost of $2,201 to provide cover for all none fire related claims. The combined total was $5,824 (see quote)
The basic Fair Plan policy will only pay the Actual Cash Value of a home at the time of the loss. That is almost always far less than the Replacement cost value. However, you can pay extra for a FAIR plan Dwelling replacement cost coverage. The other big difference is that a FAIR plan policy only covers the cost of renting a property similar to your home up to a dollar limit equal to 10% of your FAIR plan limit unless you buy the updated coverage of 20%. The other big difference is that a standard home insurance policy, in addition to providing cover to rent a property, covers additional expenses for loss of use such as extra mileage, pet boarding, meals, furniture rental etc. A FAIR plan policy does not.
The additional policy that homeowners will take out alongside a FAIRplan policy covers all none fire related claims such as personal liability and losses due to theft, flood, etc.
Whenever I am working with clients looking to purchase rural properties, especially in some of the higher risk areas, I will help them find
an appropriate policy either before putting an offer in or at the very least before we need to lift physical contingencies.
I would also recommend that clients review Calfire’s recommendations on how to harden your home and identify the steps that could be taken to harden
a home as well as get an understanding of the associated costs. Another great resource is CalFire itself. I have also gone as far as reaching out to the local fire service to ask if they will meet the buyer at the property to talk about fire risks and the things that could be done to mitigate the risk. While a lot of the advice is the same as you can find if you research online, it is great to hear the advice and draw on the experience of local firefighters.
How Do You Know If A Home Is Insurable?
The only way to find out if a home can be insured is to talk to an insurance broker and get them to run a quote for the specific address.
One of the big frustrations is that the insurance industry is not transparent about the process for determining if they will insure a home. The insurance industry uses various tools to determine fire loss potential for properties they insure. The two most common tools are Public Protection Classification (PPC) and FireLine. Both of these assessments produce a score for a property.
PPC classifies a community according to its ability to prevent or suppress fires form Class 1 meaning superior fire protection to Class 10, indicating it doesn’t meet the minim requirement. These classifications are based on four criteria:
Fire Department: What is the location of the nearest fire station, fire apparatus and availability of firefighters
Water resources: What water supply is available nearby to fight fire?
Emergency Communication: The ability of the local community to respond to calls for fire
Community Risk reduction: A community’s commitment to adopting and enforcing fire prevention measures
FireLine scores assess exposure to wildfire hazards at an address level using advanced remote sensing and digital mapping technology. It provides an objective assessment of an exposure’s propensity to burn in the event of a wildfire based on the most current assessment of three key wildfire risk factors, which are also recognized by the
National Fire Protection Association (NFPA):
• Fuel: Grass,
trees, or dense brush can feed a wildfire.
Steeper slopes can increase the speed and intensity of wildfire.
Limited access and dead-end roads can impede firefighting equipment. FireLine scores range from 0 (negligible risk) to 30
One of the biggest challenges for both buyers and sellers is the lack of certainty. No-one really knows where the next fires are a likely to strike, what the risks are and which properties in an area are going to be harder to insure than others. With this uncertainty, it is more important than ever that both buyers and sellers do their due diligence up front. That includes both buyers and sellers getting quotes as early on in the process as possible. For sellers it means taking the necessary measures to harden the home prior to sale and accepting that the cost of insurance does impact price. Whether that is in the upfront price or in a credit through escrow by way of contribution to insurance costs. It's a fact of life that over the last few years, home prices in certain areas have been negatively impacted by fires as buyers decide to look in other areas that are perceived as being less risky,