COLFAX — Wildfires and insurance are two things homeowners worry about up here in California's fire country. For those in the Sierra Foothills who are covered by State Farm, the insurer's latest rate increase is something many people will have to budget for.
It's been nearly five years since the River Fire tore through parts of Colfax, burning land and homes. Lizz Porter's family home was one of them.
With help from California's FAIR Plan, her family was able to rebuild. But today, Porter is insured by State Farm, which is a rare provider in fire country.
"From a coverage standpoint, we have a lot more coverage with State Farm, a bit less than what we would be paying on the fair plan," Porter said.
Her premiums already went up last year, but now they're set to rise again.
This week, State Farm got state approval for an emergency rate hike after the company reported significant financial losses following the devastating wildfires in Los Angeles this January, which destroyed 16,000 buildings.
State Farm has been approved to raise rates across three policy types: homeowners insurance will go up an average of 17%, renters and condo insurance will rise by 15%, and landlord policies will increase by 38%. These numbers are averages, and the actual rate changes will vary depending on location. If you live in a city, your increases may be smaller. But for those living in high fire-risk zones, the jump could be much higher.
With peak fire season approaching, state officials fast-tracked the rate increase, which is unusual. Normally, rate hikes of this size go through a lengthy public hearing process before being approved. But in this case, regulators allowed it to move forward without that step, something insurance experts say has never happened before in California.
"That's really the balancing act the insurance commissioner had to go through," said insurance industry expert Karl Susman. "Is it better to approve a higher rate and ensure claims can be paid, or deny it and risk leaving policyholders with nothing when disaster strikes?"
As part of the agreement, the state insurance commissioner says State Farm will not drop additional customers all at once. Still, many homeowners in fire-prone areas are already struggling to get State Farm coverage at all. Most rely on California's FAIR Plan, the state's insurer of last resort. While it's often the only option available, it tends to be more expensive and provides less coverage..
"I think it's not sustainable," Porter said. "I think everything is getting more expensive. It's just not sustainable."
A formal hearing is expected as early as October to review whether the rate increase was justified. If a judge finds it wasn't, policyholders could receive refunds with interest.
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