California Condo Raises Fire Insurance By 1000%

A California condo raises fire insurance rates by approximately 1000%, thereby angering and confusing multiple residents. The increase happened in just three years, making it even more puzzling for condo owners.

Prone to Wildfires

Cimmaron Oaks is a condominium complex located in a wildfire-prone area of Castaic, understandably requiring fire insurance coverage. However, residents are wondering why insurance premiums have gone up from $37,000 per year in 2019 to nearly $430,000 in 2022.

Residents have tried to push back on the increase but are out of options at this point. About 15 companies have denied the condo association coverage, resulting in difficulty for owners to sell their units.

According to residents, the fire insurance alone costs them $700 per month. And that’s on top of the $380 monthly condo fees they have to pay in addition to their mortgages.

Condo Raises Fire Insurance, Delinquencies Expected

With the price hike in insurance, some residents feel worried that they won’t be able to afford the monthly condo fees. This will undoubtedly result in a higher delinquency rate for the condo association.

Condo owners Jessica Carson and her husband were taken aback by the cost of the premium. Cimmaron Oaks is the first home they bought, and they only found out two months after moving in how much they needed to pay for the insurance.

Residents also don’t have the option to skip out on the insurance, as mortgage lenders require it. Owners also can’t take out their own policies for their individual units and insurance must cover the entire complex altogether. This makes the condo unqualified for state-sponsored fire insurance.

Insurance Companies Taking Advantage?

Residents of Cimmaron Oaks believe that insurance providers are charging exorbitantly high premiums simply because they “can charge whatever they want.” This likely stems from the fact that owners have been denied by multiple companies many times, possibly due to the location of the condo.

Consumer Watchdog founder Harvey Rosenfield also believes that companies are taking advantage of the situation to raise premiums. It’s either residents pay these premiums or they don’t get coverage at all. This is a cause for concern as it may lead to a small housing crisis in certain areas where insurance premiums are increasing.

This crisis is just one of two that Rosenfield has observed in California. The other one is climate change and drought, which is indirectly related to the fire insurance problem, as companies seek to capitalize on the hot weather.

It’s currently unknown whether the neighboring areas of the condo complex are experiencing the same issue with fire insurance. For now, Rosenfield is investigating Cimmaron Oaks specifically.