A Guide to Wildfire Insurance for Rental Properties

For property owners in California, Oregon, Nevada, Washington, and other wildfire-prone regions, insuring rental properties presents unique challenges due to the escalating risk of wildfires. 

Recent data from Verisk reveals that the 2022 wildfire season has surpassed previous years in terms of the number of fires and acres burned. This concerning trend is further fueled by the ongoing effects of climate change, causing fire seasons to start earlier and end later each year. In light of these developments, it is more crucial than ever for real estate investors to take proactive measures to protect their properties and tenants from the devastating impacts of wildfires. 

In this article, we'll break down what landlords need to know about wildfire insurance, which risk factors insurance companies look for, and tips for getting the right wildfire insurance coverage at the right price. 

A closer look at wildfire insurance

Although many homeowners have fire damage covered as a peril in their regular insurance plans, this can vary based on insurance carrier or geographic location. As a result, landlords must check their policy or consult their insurance agent first to understand whether wildfires are included in their coverage. 

Like other coverage, wildfire insurance policies vary depending on carrier and location. For example, they may cover the entire dwelling or require separate policies for the dwelling and roof. Assuming that a wildfire is a covered peril in your landlord insurance policy, you are also covered for personal property, loss of rent, structural damage, and more when you file a claim (as long as your policy includes coverage for these elements of the property). Some wildfire insurance policies may have a separate wildfire deductible, which may be higher. 

That said, some insurance carriers will cover your property from frequent fires but specifically exclude wildfire damage for properties in certain zip codes, geographies, or even during certain times of the year. In this case, landlords must invest in separate wildfire insurance policies on top of other standard policy coverage. That said, some carriers may allow landlords to add wildfire insurance by endorsement, while others may not. 

For real estate investors who aren't covered in the event of a wildfire or can't get an endorsement for their policy, there is always the option to buy independent wildfire insurance. Annual premiums for wildfire coverage can range from $1,000 to more than $5,000 for the average single-family home. For higher-value properties in states like California with coverage up to $1M, your annual premium could be as high as $40,000. Rental property owners should note that these figures will likely only increase as wildfires become more frequent and severe.

Another key consideration when it comes to wildfire insurance is whether or not your policy includes coverage for smoke damage. In this case, landlords should inquire about adding smoke damage as extended coverage or an endorsement while confirming that wildfire is not excluded.

Alternative insurance: FAIR Plan for high-risk properties

If you find yourself in a high-risk wildfire zone where obtaining insurance becomes challenging, an alternative option is available: the Fair Access to Insurance Requirements (FAIR) Plan. Specifically applicable in states like California, the FAIR Plan is a state-sponsored program aimed at ensuring that properties in high-risk areas remain insurable. While the coverage provided by the plan may be less comprehensive than traditional insurance policies, it offers a safety net for property owners facing difficulties securing coverage.

It is important to note that the FAIR Plan is not limited to wildfire risks alone. This program also extends its coverage to coastal properties at risk of hurricanes and other hazardous situations. This means that property owners in coastal areas prone to severe storms and other natural disasters can also benefit from the plan's provisions.

Participating in the FAIR Plan allows property owners to access a viable insurance option to meet mandatory insurance requirements while residing in high-risk areas. While the coverage may have specific limitations, it provides a vital layer of protection, ensuring that properties and their owners are not left vulnerable to financial losses in the face of catastrophic events.

3 tips for choosing the right wildfire insurance coverage

The key to finding the best wildfire insurance? Clear communication with your agent and a full understanding of what your insurance actually covers. Below are three tips for landlords looking for comprehensive, cost-effective wildfire coverage. 

1. Understand your policy inside and out — including its limitations

As an investor, it's your responsibility to understand your insurance policy inside and out. Carefully review your coverage and talk to your agent to answer questions like: Does this coverage only protect my rental property, or does it include my tenants' belongings? If there is wildfire damage, what can I claim (e.g., rental income losses)? Knowing the answers to these questions will make all the difference in an emergency situation. 

2. Review your wildfire insurance coverage annually

Evaluate your wildfire insurance coverage each year to ensure you fully understand the policy and haven't missed any new changes. Maybe your carrier no longer offers protection against smoke damage or has increased the deductible. This is crucial to know ahead of time so you don't have to scramble in an emergency situation should you need to make a claim. 

3. Avoid shopping for insurance during peak wildfire season

Historically, wildfires are most likely to happen between May and October. However, the wildfire season has been getting longer due to climate change. As a result, it’s important to avoid shopping for insurance during peak season so insurers don’t think you’re trying to get a new policy just to file a claim right away. 

How to prepare your rental properties and tenants for wildfires

Even if you’re able to secure a comprehensive wildfire insurance policy, it’s best to take steps to protect your rental property from wildfire damage. Here are a few tips to mitigate potential risks and educate your tenants about wildfire safety. 

Maintain safe wildfire season practices

Though you can't predict when a wildfire will strike, you can be prepared in advance. The key is being proactive and staying attentive to how you can minimize the need for a claim. Mitigating risk begins with taking precautions — including fireproofing your property's exterior, regularly clearing brush, and setting up firebreaks. Rental property owners should also be sure to store flammable items like gasoline cans in a heat-safe container off the ground and away from flammable structures as much as possible. If you're purchasing a rental property in a wildfire-prone area, check where the closest fire stations are — this may even help lower your premium. 

Require tenants to get renters insurance

Renter's insurance is crucial to protecting your rental properties, especially in wildfire-prone areas where tenants and their possessions are at risk of damage that may not be covered under your landlord policy. As a landlord, you should encourage or even require tenants to protect themselves and their belongings by investing in renters insurance. Looking for a carrier to recommend tenants? At Azibo, we provide comprehensive renters insurance policies that assure your residential tenants of the safety of their belongings. Our coverage protects a wide range of possessions, from essential items like laptops and furniture to recreational equipment like mountain bikes. We offer protection against various unfortunate events, including theft, fire, and other specified losses, with particular attention given to potential wildfire damages in most policies. 

Educate tenants and property managers effectively

As a property investor, it's not enough to be prepared for wildfires — you also need to inform your tenants and, if you don't self-manage, your property managers. This means preparing them for what to do or who to call if there is a suspected wildfire, sharing best practices on protecting their possessions, and reminding them to check what's covered under their renters insurance. If tenants are also responsible for maintaining the rental property, remind them to clear brush, mow high grass, and store flammable materials in non-flammable areas. This helps minimize risks if you live far from your rental properties and can't regularly check on them. 

Take photo inventory of property and possessions

Wildfires start quickly and can consume a property in a matter of minutes. Both rental property owners and tenants should take photo evidence of their property and possessions in advance to help insurance carriers assess the damage later. Don't wait till wildfire season to take photo inventory and create an itemized list — it's best to be prepared before a blaze strikes. 

Establish a community fire safety network

Encourage collaboration among your tenants and neighboring property owners to create a community fire safety network. Foster communication and cooperation by organizing regular meetings or events focused on wildfire preparedness. Share resources, knowledge, and best practices within the community, such as information on local fire-resistant contractors, wildfire safety workshops, or volunteer firefighter programs. A strong community network enhances collective efforts in mitigating wildfire risks and supports prompt response during wildfire events.

How Azibo can help landlords navigate wildfire insurance

Azibo can help you demystify the complex world of wildfire insurance by guiding you to find the right plan for the right price. Our expert insurance team will:‍

• Educate you about the importance of wildfire coverage. We're your partner in answering questions, understanding risks, and mitigating those risks before they escalate into full-blown problems.
  Help you understand your existing coverage. It's no help to have wildfire coverage that doesn't meet your needs or falls short on some of your requests. For example, if you're not covered for smoke damage, we can help you find that out. If you need clarification about your current policy, log into your free account and upload it to the Azibo Insurance Center. Our experts will then help you unpack the terms of your coverage so you have full insight into what you’re paying for — and what may not be protected in the event of an unexpected wildfire. ‍
• Support you looking for wildfire coverage and FAIR plans or quotes. We can help you find a policy that either includes wildfire coverage or offers a separate wildfire policy, depending on your needs. ‍
• Recommend renters insurance for your tenants. Be prepared for disaster by ensuring your tenants and their belongings are covered. We’ll help you set your tenants up for success with comprehensive renters insurance that protects them from the costs of unexpected damages and injuries. Residential tenants can purchase renters insurance directly in Azibo. For commercial tenants, our expert team can help them find the right renters insurance policy for their needs. ‍
• Provide additional tips to mitigate risk. Unfortunately, wildfires are a reality of the natural landscape in many states. Knowing how to prepare properties and tenants for these situations is key to staying safe. 

Protecting your rental properties and tenants from wildfires

Safeguarding your rental properties and tenants is crucial as wildfires continue to pose significant risks in wildfire-prone regions. Throughout this guide, we have provided essential insights on wildfire insurance, risk factors, and mitigation strategies to help you navigate these challenges.

Taking proactive steps to protect your rental properties is essential, even with comprehensive insurance coverage. You can significantly reduce the risk of damage by implementing safe wildfire season practices such as fireproofing the property's exterior, regularly clearing brush, and creating firebreaks. Requiring tenants to obtain renters insurance also ensures their belongings are protected in wildfire-prone areas.

Educating tenants and property managers about wildfire safety measures, clarifying coverage details, and emphasizing regular property maintenance are vital for minimizing risks. Taking photo inventory of the property and possessions in advance helps facilitate insurance claims and assess damage in the event of a wildfire.

In high-risk wildfire zones, consider the Fair Access to Insurance Requirements (FAIR) Plan as an alternative option to obtain coverage. Although the FAIR Plan offers limited coverage, it ensures that properties in these areas remain insurable.

By implementing these strategies and staying proactive in wildfire risk mitigation, you can better protect your rental properties and tenants from the devastating impacts of wildfires. Stay informed about local resources and programs that can provide additional support in wildfire risk management.

At Azibo, we are here to support you in navigating the complexities of wildfire insurance. Our expert team can help you understand your coverage, find the right insurance solutions, and provide valuable tips to mitigate risk.

Stay prepared, stay informed, and let Azibo be your trusted partner in protecting your rental properties and tenants from the increasing threat of wildfires.

Azibo Insurance Services LLC, a wholly owned subsidiary of Azibo Inc, is a licensed insurance producer. Contact us to discuss your specific insurance needs.

Disclaimer: The information provided in this post does not, and is not intended to, constitute insurance advice; instead, all information, content, and materials are for general informational purposes only. This content may not constitute the most up-to-date insurance information. Readers must contact a licensed insurance agent or company to obtain quotes, advice, and guidance with respect to any insurance matter. No reader, user, or browser of this article should act or refrain from acting on the basis of information herein without first seeking the advice of a licensed insurance producer.