California faces a new housing challenge as State Farm, a major insurer, plans to drop 72,000 home-insurance policies due to rising costs and wildfire risks. This retreat could impact home prices and sales.
State Farm will cease coverage for 30,000 homes and 42,000 apartments from July 2, affecting about 2% of its California policies. This move may hinder home purchases as lenders often require homeowners insurance.
According to CoreLogic, areas with higher wildfire risks experience declining home prices. Existing homeowners may struggle with costly insurance or opt to sell their homes.
Experts advise affected parties to explore alternative insurance options. With escalating wildfire risks, more homeowners in vulnerable areas may sell, further lowering home prices.
Nationwide, homeowners insurance costs are rising, averaging $1,522 annually in 2023. California’s rates remain comparatively lower due to strict regulations, like Prop 103, limiting insurers’ rate hikes.
Despite increasing premiums, skipping insurance is risky, potentially leading to financial loss in disasters. Some homeowners are contemplating relocating to avoid rising insurance costs, reflecting a broader concern nationwide.
