The Core

The change does not apply to personal auto insurance or existing home insurance policies in the state.

State Farm started here by not issuing new policies, but one by one, they non-renewed every policy. Same with All State, Farmers, AAA, and everyone else.

They may not be canceling existing policies en masse, but it will be harder and harder to renew and fewer and fewer places will meet the necessary criteria. I suspect it will come down to highly, highly urbanized areas where large expanses of concrete reduce risk and perhaps some agricultural areas where large, carefully planted swaths of land reduce risk. But in general, this was a fire-dominated landscape for thousands of years and it is becoming so again.

It’s only 100 years ago that very few people had mortgages on their homes. Between increased costs for materials, dramatically fancier houses and codes that require lots of expensive things, that is completely out of reach.

It is an interesting thing though. My insurance is over $10,000 for about $600,000 in coverage. If I assume a 5% rate of return, that means that if I were to invest that money rather than buy insurance, I would break even in nominal dollars in 28 years.

I do not have enough savings to risk losing my house outright, but if I had, say, another million dollars or so, I think it would make more sense to invest the money than to buy insurance. I already have a couple of wealthier neighbors who have made that calculation and dropped their insurance.

It’s conceivable that at a certain price you go into this spiral where a large number of people who need insurance can’t afford it and a large number of people who can afford it don’t need it and won’t pay for it.