Homeowner’s Insurance in the Wildland-Urban Interface

Wildfires are mostly associated with the dry American West (California, Arizona, New Mexico, Colorado, and nearby states). But changing weather patterns and, more importantly, an influx of people living along the wildland-urban interface (WUI) has increased the wildfire risk to people and homes outside those states.

This article takes a look at the risks and homeowner's insurance issues that come with living in WUI's (for a primer on homeowner's insurance, see 5 Keys to Homeowners Insurance for First Time Owners).

What Is a WUI?

Wildland-urban interfaces are areas where forests, grasslands, and other areas not occupied by people (including national parks, national forests, and land owned by logging companies) are immediately adjacent to urban areas—not only cities and towns, but smaller human settlements as well.

WUI's are desirable locations for many homeowners because of their proximity to open spaces and wildlife, and there are few laws or zoning ordinances preventing people from building in them. While the vast majority of these areas are east of the Mississippi river, there are numerous zones in Washington, Oregon, and California as well.

The risk of wildfires is greater in the drier, western states, but this is not to say that there are no risks in the east. And these risks affect a significant portion of the population. According to a recent article, 32% of Americans live in a WUI zone (other estimates run as high as 40%, with the percentage on the rise).

What Are the Risks?

Over the coming decades, temperatures are predicted to rise and rainfall is predicted to fall in parts of the 48 states, especially those in the west. Wildfires are likely to become more common as a result. And we're already seeing this trend start to take effect: in recent years, fire-fighting seasons in the western states have expanded.

Less well known is that in many areas—perhaps two thirds of WUI zones—the local fire fighters are neither trained nor equipped to fight forest fires. Moreover, according to a Blue Ribbon Panel report on WUI Fires, the number of structures destroyed by wildfires increased from some 200 per year in the 1960's to about 2,700 per year during the period of 2000 to 2008. In 2015 alone, more than 4,500 structures were destroyed.

How Are Insurers Reacting?

Insurers have suffered increased losses as a result of insured homes in WUI zones being lost to fires. By one estimate, losses rose from $600 million in 2016 to $1.4 billion in 2015. Understandably, then, insurers are reacting—slowly but surely.

In most areas, home insurance premiums have risen. Insurers might also require homeowners to make modifications to their property as a condition for renewing their policy. These typically involve ensuring that roads are of a size and quality that allows easy access for fire-fighting vehicles and establishing defensible spaces, areas around the home or other structures that are stripped of combustible plants or of anything that burns easily.

Some insurers, especially in California, are refusing to insure houses built out of particularly fire-prone material like wood-shingled roofs, or property in regions that are deemed especially risky.

In some cases, insurers will look to how seriously the local communities are taking the fire risk. If risk assessments have been done, action plans drawn up for how to fight fires, and financial resources made available to fund firefighting efforts, insurers are far more likely to be willing to issue policies.

So far, virtually all homeowners are still able to obtain insurance, but in some cases they are forced to turn to wholesalers for more expensive, "substandard" insurance. In 32 states, including California, Oregon, Washington, and the District of Columbia, homeowners can obtain insurance through FAIR plan if they are turned down by insurers. Although, in this case the premiums will, again, be higher.

The Bottom Line

The future of home insurance for homeowners living in WUI zones will likely involve:

• Fire-safe construction and landscaping required for more and more areas
• Insurance growing more expensive and, in some cases, only available through specialty wholesalers
• Homes in WUI zones becoming less affordable to low- to moderate-income families due to increased insurance costs

If you are contemplating moving to a WUI zone, consider carefully and investigate the trends in the area you are thinking of moving into (you may also want to consider moving insurance—see You're Moving! Here's Why You Need Insurance to learn more). Talk to local insurance agents and homeowners and find out whether insurance rates have been rising, whether some homeowners have been forced into the specialty market, and whether the community has prepared risk assessments and action plans.

Be sure to look to the quality of the local firefighting units and the quality and size of the roads between any property you might buy and the fire department. Notice when looking at properties whether the structures are built of fire-resistant material and whether they are surrounded by defensible spaces. Defensible spaces can be created without too much difficulty, but replacing a wood-shingled roof would be more expensive.

If you are already a homeowner, ask your current insurer whether they would insure you, and what the premiums would be, if you moved into any particular property you are looking at. Keep in mind that if you move into a fire-prone area, premiums are likely to rise over the years at a rate that outpaces inflation.

WUI zones are often beautiful spots to live in and their appeal is understandable, but be alert to fire risks and their effects on your insurance before you buy (to find out what other effects you can expect from changing weather patterns, see 5 Ways Climate Change Can Affect Your Home Insurance Policy).