If you’re a California resident, you’re relatively lucky, despite the fact that your home may be built on a floodplain, on a wildfire-loving, brushy mountainside, on an earthquake fault or right in the way of giant mudslides.
Despite all that, California residents can enjoy homeowners insurance that’s sometimes less than the national average (especially when you consider home values) because of all of the insurance companies in California vying for your business.
Quick Look: Best Homeowners Insurance in California
- State Farm – Get a Quote
- Mercury – Get a Quote
- Travelers – Get a Quote
- Nationwide – Get a Quote
- Safeco – Get a Quote
However, there’s the big “E” that’s unavoidable in California: Nearly five out of six homeowners do not have earthquake insurance.
Average Annual Premium in California
California’s beauty and opportunity come at a cost with some of the highest housing prices in the nation. The average home cost in California is $440,000 vs. a national average of $180,000.
Homeowners insurance premiums, on average, are lower than might be expected, however, with an average $974 for the Golden State. While California’s average premium close to the national average of $1,132, the difference in price in some areas is related to risk and (partly) to home prices.
Homeowners insurance policies feature dwelling coverage, which pays toward covered claims that damage the home. Dwelling coverage is based on the cost to rebuild the home. The same home will cost different amounts to build in different parts of the country, based on building supply costs, transport costs, and labor costs. However, that doesn’t explain all of the increased cost of homeowners insurance in California.
While dwelling coverage is based on the calculated cost to rebuild the home, mortgage lenders may require higher dwelling coverage amounts. A home that costs $250,000 to rebuild may sell for $450,000, based on its location in sunny California. Assuming a 20% down payment, that leaves a $360,000 balance on the mortgage. Many lenders will require dwelling coverage to be equal or higher than the mortgage balance.
Your insurance policy is insuring your home and that home is securing the loan. The increase in dwelling coverage that will be required by some lenders drives average homeowners insurance premiums higher.
Finding the Best Premium for Your Home
With home insurance premiums in California a bit higher than the national average, California homeowners have an interest in saving money on their insurance, without sacrificing quality coverage.
There are a number of ways to save money on homeowners insurance:
Bundling. Many insurers offer a discount on your home and/or auto insurance if you purchase both policies from the same insurer. Ask about bundling discounts and if you do bundle, check your bill for the discount.
Bundling discounts happen automatically with some insurers while others require that an agent submit the change. You don’t want your discount to fall through the cracks.
Deductibles. The deductible for an insurance policy is the portion you would pay toward a covered claim. Many homeowners insurance companies have moved toward a percentage-based deductible, meaning the insured pays a fixed percentage of the dwelling coverage amount toward their covered claim.
Choosing a higher deductible will lower your premium, but be aware that percentage-based deductibles can be quite high if the dwelling coverage for your home is high. It’s all savings until there is a claim, and then the deductible you chose is real money that will have to be paid toward your claim. Many policies will have separate deductibles for wind/hail vs. other perils.
Alarms and smoke detectors. Most insurers offer a discount for security systems. Homes with a fire alarm as well will earn an additional discount. Smoke detectors are not only required by code but also will save you a few dollars on your home insurance premiums.
Newer homes. The added safety modern building codes bring to a home can save you money on homeowners insurance with some insurers.
Inclement Weather in California
California’s climate and terrain are as diverse as its residents. The massive state features gorgeous coastlines, snow-capped mountain ranges, and even deserts. From sun to snow, California has it all with regard to the weather.
Dry weather in California also leads to more frequent wildfires in some areas, and not just the kind that stays in the woods. Entire neighborhoods and large parts of towns have fallen to wildfires in the state and it isn’t unusual for a wildfire to spread over 100,000 acres.
Much like in areas subject to ocean storms or prone to flooding, some insurers will not write policies for homes in brush or wildfire areas. However, every insurance company has its own underwriting guidelines and there is usually another company that will offer coverage.
While less frequent than in the southeastern states, coastal storms can be a risk for some California residents and low-lying areas or areas with poor drainage can flood during storms or from heavy rain. Floods are not covered by homeowners insurance but a separate flood policy can be purchased. As odd as it may seem to those who have never seen it, the northern mountains of California are sometimes buried in feet, not just inches, of snow.
Some main roads are closed off with gates during snowstorms because plows can’t get up the inclines and neither can rescue or emergency vehicles. If you live in these areas, a few feet of snow and ice on your roof can be a serious risk to your home.
Additionally, these more remote areas tend to be farther away from a fire department or water source, which will affect homeowners insurance rates.
Many Californians have grown accustomed to some meddlesome wobbles in the ground as small earthquakes and tremors shake the state’s foundation. Small earthquakes don’t usually cause much damage, but a higher-magnitude quake can cause catastrophic damage, and it isn’t covered by a standard homeowners insurance policy.
A law passed in 1985 mandated that insurers who write homeowners insurance policies in California also offer earthquake insurance. However, earthquake insurance is a separate policy that comes with its own deductibles and a separate bill, of course.
Rates for earthquake insurance vary based on location and the insured value of the home. Insurance rates aren’t arbitrary. Rates are based on risk. A California earthquake in 1994 resulted in more than 300,000 claims and $12 billion in home damage.
An area can go months or years without a spike in claims, until a catastrophic surge in claims skyrockets rates for everyone, possibly forcing some insurers to close up shop or to leave the state. In general, earthquake insurance isn’t cheap because losses are often much higher than with other home insurance perils. Even if the home hit by an earthquake is still standing, a damaged foundation or cracked slab can force a total rebuild of a home.
An earthquake policy can add $1,000 to $5,000 a year to the cost of owning a home in California. If there is a claim, deductibles can be as high as 15 percent of the insured value of the home. With a deductible this high for a home insured for $450,000, homeowners would have to pay nearly $70,000 toward their claim.
This policy structure eliminates all small claims because there would be no payout, making earthquake insurance a plan for the worst case scenario, a total loss or a near-total loss. Because deductibles can be so high with some insurers and because premiums for earthquake insurance can be higher than the premium for standard homeowners insurance policy, consumers should compare several quotes to be sure they find the best policy for their needs and budget.
Most Affordable Cities
Rates for home insurance are individualized, but some areas have lower average premiums than others. Differences in risk are usually at the heart of differences in rates.
A given area may have less crime, more brick construction, smaller homers or newer homes, or less exposure to weather-related risks. Some of the most affordable cities in California for home insurance include:
- Santa Maria
- San Luis Obispo
- Santa Barbara
- Paso Robles
Most Expensive Cities
Among some of the more expensive cities in California for home insurance are:
- Los Angeles
Top Picks for California
1. State Farm
State Farm has been writing policies since 1922 and now insures more cars and homes than any other U.S. insurer. With an A.M. Best rating of A++ for financial strength, State Farm makes a stable choice in a state with such a variety of risks for homeowners. Rates are driven by both individual criteria and by broader trends, including recent spikes in claims.
A recent ruling by California’s Insurance Commissioner ordered State Farm to reduce homeowners, renters, and condo insurance rates by about 7 percent, possibly making the insurer’s rates more attractive than those of some other California insurance companies. As always, customers are encouraged to shop around and compare policy features in addition to rates.
As an added bonus, State Farm has one of the largest agent networks of the major insurers, making a local office easy to find for customers who have questions, need service, or are ready to buy a policy.
Founded in 1962, Mercury Insurance was started in California, making this insurer uniquely familiar with the state, its vast geography, and the needs of its residents. In an industry where many policies look the same, Mercury finds a few ways to stand out from the pack.
One notable benefit of their homeowners insurance policy is the company’s Extended Replacement Cost option, which provides additional coverage up to 150% of the dwelling coverage limits.
Dwelling coverage is the portion of the policy that covers the house itself and cost overruns due to delays or compliance with new building codes aren’t uncommon. Extended Replacement Cost from Mercury promises to provide consumers with some more room in the budget if dwelling rebuild costs start to swell.
Both directly and through its network of nearly 14,000 independent agents (around the world), Travelers has been providing insurance for over 160 years, earning the reputation of being one of the best property and casualty insurers in the market.
Travelers prides itself on its breadth of policy options which provide consumers with the ability to customize their policy to meet their needs.
Nationwide provides two important homeowners insurance policy options that not every insurer offers, or even talks about. Nationwide’s Brand New Belongings option provides replacement cost coverage for your personal property.
Some home insurance policies only provide actual cash value, which means you are paid for the depreciated value of your belongings in a covered claim. The depreciated value often isn’t enough to replace all you need to replace. Another policy option offered by Nationwide is Better Roof Replacement which guarantees that your roof will be rebuilt with stronger and safer materials if it needs to be replaced due to a covered loss.
Nationwide offers a discount of up to 20% for customers who bundle home and auto insurance and the company offers a discount for policyholders 60 years or older.
This insurer provides a pretty neat benefit for customers who bundle home and auto policies called Multiple Losses One Deductible. The way it works is if a claim damages both your home and your car, you would only pay one deductible.
For example, if a tree falls on the garage and damages both the garage and the car parked inside the garage, you wouldn’t pay both a comprehensive auto insurance deductible and a home insurance deductible. The auto deductible would be waived. A multi-policy discount would apply as well for customers who bundle both auto and home insurance.
Safeco also provides an option to insure your belongings for their full replacement cost, ensuring you’ll have enough money to replace your things that are damaged or destroyed in a covered claim.
Two Bonus Companies for Earthquake Insurance
While all insurance companies that sell homeowners insurance in California are required by law to offer earthquake insurance, there are a couple of companies that take this specialization to heart.
Both of these companies are well-versed in the earthquake insurance business as opposed to some competitors who sell earthquake policies as an aside. Policies options from both insurers provide flexibility to design a policy that meets a goal of lower premiums or lower deductibles, or somewhere in between.
If you’re in an area that is prone to earthquakes, it makes sense to talk to an expert and explore your coverage options.
We all like to save a few dollars on our home insurance premiums.
However, choosing a policy that provides the coverage you need can save massive amounts of money if there is a claim, turning the few extra dollars you might spend into a well-planned investment in protection for you, your home, and your family.
Want to learn more about finding affordable insurance? Check out Benzinga’s guides to the best cheap car insurance in San Francisco, San Jose, Los Angeles or San Diego, the best affordable health insurance and the best umbrella insurance policies.
Frequently Asked Questions
1) Q: How long will it take for my homeowners insurance claim to be processed?
It depends on the company, but you can expect an initial response between 24 and 48 hours.
2) Q: If my home is destroyed due to fire or weather, how long will it take for my insurance claim to be settled and my home to be repaired?
From start to finish, the process could take anywhere from 12 to 24 months. The variables that play the largest role are the size of the loss and the insurance company you choose.
3) Q: What can I do to ensure that my home is properly covered?
The most important thing you can do is have a conversation with your agent or carrier to be sure you have the right amount of coverage. Avoid putting just the minimum coverage on your home: Remember, if your home is destroyed, you need to have enough coverage to rebuild the entire home, so you’ll want to insure it for more than just the market value. Also, notify your insurer of renovations or changes that you make to your home — and don’t forget to check to be sure you have enough liability coverage.