First your home burns to the ground, then you remember that the insurance company canceled your policy a few months ago.
That's the situation facing many of the Pacific Palisades homeowners who've lost their homes in the disastrous wildfires that roared through their neighborhood this week.
Many thousands of homeowners in the Los Angeles area were booted off their policies in recent months, especially those who had been covered by State Farm, which abandoned much of the state. A recent investigation by the San Francisco Chronicle found that the insurer had planned to cancel 69.4% of policies in the Pacific Palisades neighborhood.
Insurance Commissioner Ricardo Lara said in late December that California would allow "reinsurance" costs -- the insurance that insurance companies buy -- to be added into premiums while also requiring insurers to write more policies in high-risk areas. But it's doubtful that action came soon enough to help today's fire victims.
Beyond the Palisades, a similar situation afflicts many homeowners throughout Southern California. Some have been without insurance for more than a year, basically playing roulette with their largest personal asset.
A growing insurance drought
California isn't alone. A report published in December by the U.S. Senate Budget Committee found that Florida, Louisiana and North Carolina were also suffering from an insurance drought.
“It’s deadly, deadly serious,” said Sen. Sheldon Whitehouse (D-Rhode Island), who commissioned the report. He called the non-renewals "a sign of market distress."
Nearly 3% of insurance policies in Florida weren't renewed in 2023, the highest non-renewal rate in the nation for the last year covered by the report, which warned that other states were likely to experience similar insurance crises as climate change accelerates across the country.
"Unless the United States and the world rapidly transition to clean energy, climate-related extreme weather events will become both more frequent and more violent, resulting in ever-scarcer insurance and ever-higher premiums," the Senate report warned.
"This is predicted to cascade into plunging property values in communities where insurance becomes impossible to find or prohibitively expensive -- a collapse in property values with the potential to trigger a full-scale financial crisis similar to waht occurred in 2008," it said.