Episode 24: Fire Insurance for a Home in Montecito or Santa Barbara

Scott: Sweet Home Santa Barbara where the skies are so blue. Sweet Home Santa Barbara, what’s worked for me can work for you.

Jonathan Robinson: Welcome back friends to Sweet Home Santa Barbara. I’m your co-host, Jonathan Robinson. I’m with my friend, realtor, and co-host.

Scott Williams: Scott Williams.

Jonathan: And today, the subject is all things fire, insurance, preparing your house, and all kinds of stuff. Very timely nowadays with fire season happening about 9 out of 12 months a year. I know my insurance where I live, I live in Northern California, went up 600% this last year, so it’s a real concern. I’m wondering what you have to say. What are the changes in the law’s insurance, and what do you suggest people do in terms of protecting their house?

Scott: Well, we’ll sort of take those one at a time. I’d say, the first thing that’s happened in real estate as of January 2022, this year, they have handed a new form to us, as Realtors, and say, “Anybody sells a house, everybody fill this thing out.” And it’s called a fire hardening and defensible space disclosure and addendum. So, we have to talk about it. It’s now forced upon the marketplace. You have to talk about fire.

Jonathan: So, what does that form do, or say? What’s the bottom line of it?

Scott: Well, the important thing is that it brings up the conversation. There are basically three levels of fire insurance, and maybe hazard of your house, it’s sort of like the good, better, best. It’s the “not much of a problem” kind of a “medium problem” and then kind of a “high problem”. And I thought that was fairly straightforward, that there were just maps that you could look at and it would tell you a little bit about this. And the fire insurance companies are looking at the same maps and kind of treat you according to where you were on the map. But it’s not as straightforward as that. I wanted, when we started this conversation, is like, I’ll just send people to a website, they can type in, put their address, and I’ll find out kind of what they’re going to deal with their insurance. No, not simple. It’s not like that at all.

Jonathan: So, what do people do? How do they find out what category they’re in?

Scott: Well, it turns out that the fire insurance companies are aware of those maps. Every insurance company has its own algorithm. It’s an artificial intelligence term for, they have their own ways of determining what the costs of your fire insurance should be. But they have something they call capacity. They take risks with ensuring homes, and where the problem comes for them is if they have too many homes insured, like in a little tight cluster, and a fire happens right there, then they get hit with very big costs.

So even though you may be in a lower fire zone, or like a medium fire zone, they may have too much risk in their own mind, and then they just cut off that whole ZIP code, or that whole area, for the whole year and say, “We’ll talk to you next year. We’re not insuring anybody else until 2023 or 2024. And that makes it hard to shop for insurance because you don’t know what’s inside the computer of any of these insurance companies.

Jonathan: Yeah. So, my insurance went up 600%, and I’m wondering, once that happened, I shopped around and got on the California fair plan which was an increase of my insurance of 300%, so 600%. So, what do you know about California Fair plan?

Scott: It is available Statewide. It’s run by the state of California. And it is the last insurance that once the companies cut off and say we won’t insure anymore, California Fair Plan, I think, insurers pretty much all locations in the state of California. It has limitations on how far it will go or how much money– We’ll talk a little bit about how that affects us locally. But it’s the same up where you live in Northern California.

What companies often do, it’s called a wrap around policy, they take the California Fair Plan, which is sort of your basic insurance, and then they add another layer on top of that. So, lots of times you have two insurances. Do you have that as well?

Jonathan: Yeah, I do.

Scott: Well, let’s talk a little bit about this document before we just go further in insurance. The document requires that a seller– if you’re in the medium area or the high area, you are forced to answer 6 questions about how defensible your spaces around your house are, and some of the things that you may or may not have done. And 2010 is a year in the whole– it’s the codes, the building codes of houses where they strengthen how you had to build a house to resist fires. So, houses built prior to 2010, has to answer these questions. They are important if you’re in a higher fire zone. Your agent will go over them with you if you are in one of those areas.

But let’s talk a little bit about insurance itself. We’re going to take it from the point of view of Santa Barbara for a moment here. Montecito, the most expensive area, had a fire, the Thomas fire, in 2017 and the Debris flow in 2018 which was associated with that fire when the water washed through the areas where the fires had come through. And insurance went up a lot, the 300% or 600%, some of the increases here were much higher than that. Right now, one of our biggest insurance companies that wrapped around Fair Plan was farmers, and they have now dropped out for the rest of this year because they’ve reached too much capacity.

Several others have dropped out to 2013. So, we have a fairly small number of choices. Sometimes only one or two. And if your house is less than 3,500 square feet, your insurance is with a wraparound plan with California Fair plans, which is going to run you 10 to 15 thousand dollars a year. If you’re over 3,500 square feet, I hope you’re sitting down when you hear this, but your insurance minimum is probably going to be $86,000 a year in Santa Barbara.

Jonathan: You better have a lot of money in order to cover that.

Scott: Well, you know, we hope so, if you’re living in Montecito. And we hope that things may open up after 2023. Now, let’s talk about elsewhere. If you’re not in Montecito, there’s no blanket rules because each company runs its own algorithm of whether how much capacity they’ll take, and what area you live in. And you just have to check. You just can’t do it ahead of time. And you don’t know until you actually go shopping. But many homes are going to find themselves at a $2,000 or $3,000 a year range. This is like a 1500, 1800, 2000, 2500 square-foot house that’s not in a high fire zone.

If you have a little Bungalow downtown, two-bedroom, one bath, less than 1,000 square feet is probably 1,000 to 1,200 dollars a year. That’s the current. But if you have to do the California Fair Plan wraparound where you have– that’s probably still 10,000 to 15,000 dollars. It could be a substantial amount of money that you have to pay for your insurance.

Jonathan: Important to consider. So, any other tips around Insurance before we go into things like, how to prevent or deal with fires?

Scott: Call me. I’m familiar with the absolute top insurance agents that are completely on top of this, and really know how to do a great job of shopping for insurance, and all the ins and outs. It is a very niche item. You need the very best person that you can possibly get. So, ring me up, I know who that is, and let’s get you connected with them if you’re in an insurance mind.

Jonathan: Okay. That’s a nice service. Now, let’s talk a little bit about what are the top five things to do around your home to prevent it from burning down if a fire breaks out.

Scott: Yeah, this is called defensible space. It is really important. That no matter when your house was built, almost anywhere you in California, that some of this you’re paying attention to; the first one, I think applies, especially if you’re away from the town, that you don’t plant bushes, shrubs, and trees right up against your house. We always did that. And now, that’s just not a good idea.

Jonathan: Yeah. I know that one thing that is encouraged here is to have a go-bag. If a fire breaks out, your set with your most important documents, money, or photos. My wife and I have that. That’s something that’s pretty important.

Scott: That totally makes sense. It’s sort of like, if you’re traveling, have a couple of sets of clothes in your carry-on bag in case the airline loses your luggage. That’s a really wise idea. You should have your bag ready to go and out the door. Absolutely. I agree.

Now, there are a few places where fire can get into your house that you can slow the fire down. One of the big ones is the ventilation underneath your house. If you have that style of home where you have a sub-area, you can put screening on each of those vents that are much less likely to have embers blow under your house. That’s an important one. Similar to that is the gutters. Often times your gutters fill up with leaves, needles, pine trees, and different litter that’s falling on your roof, and they will catch on fire. They have really nice ways of covering those up so that Fire won’t get into the material that’s right there on the edge of your roof that could burn.

Jonathan: And last but not least, I think having hoses around your house so that you can water it down. Makes it less likely, it’s going to burn down.

Scott: Yeah, prepared with your hoses. One thing that’s the most likely place for a fire to get into your house, besides the ones we’ve talked about, are the eaves of your home. It’s possible to have even after they were built is to box in your eaves, make it much more difficult for a fire to just get into that edge where the horizontal surface on the roof meets, just not have the fire go in there, they’ll give it a pathway into your house. These are small but potentially very important defensible spaces and keep your home from burning down that everybody should do.

Jonathan: Yeah, great information. How can people get a hold of you?

Scott: Well, I think that email is the best. Scott@ScottWilliams.com, please

Jonathan: Okay. Well, keep listening, tell your friends, this is useful information. We all want to prevent fires. And hopefully, we’ll hear you next time at Sweet Home Santa Barbara.

Scott: Thank you for listening, please subscribe to our podcast on your favorite app. If you know someone preparing to sell their home, please tell them about the podcast. Visit scottwilliams.com to contact me. And download the two free E-booklets: “Is My House Saleable Now?” and “How Not To Buy A Money Pit”. Thank you for listening.