As a Realtor with Sotheby's International Realty in Los Angeles, California, Corey Nelson draws on over 12 years of experience in the local market. Realtor Corey Nelson helps buyers to navigate the complexities of buying a house, which includes the purchase of homeowners insurance.
While the law does not require someone to have homeowners insurance simply because he or she owns a property, most mortgage lenders do require buyers to have a policy. This protects the lender against loss in case that a fire, natural disaster, or other event leads to damage or destruction of the home.
Under California law, insurers can determine their own rates, provided that they secure approval by the California Department of Insurance (CDI). As long as the CDI determines rates to be competitive and reasonable, the insurer can charge a buyer based on coverage purchased, construction of the home, property location, and other factors that may increase or decrease an insurer's risk. If a homeowner cannot afford a policy at market rates, he or she may be able to secure coverage through the state's Fair Access to Insurance Requirements (FAIR) plan.
The insurer has the right to alter these rates within 60 days of a policy start, provided that the company contacts the buyer and gives him or her the opportunity to cancel coverage. In addition, the insurer can only cancel coverage after the policy has been active for 60 days, and then only for specific reasons including nonpayment, fraud, or significant changes to the property. The policy holder must receive notification at least 20 days before cancellation, or at least 10 days prior in the case of fraud or failure to pay.