The following factors are currently influencing homeowners insurance rates and availability:

• Increases in the cost and volume of claims: It’s a fact that homeowners insurance in Arizona, and across the country, has changed significantly in the past few years. The increased amount of funds paid out per claim  and the increased number of submitted claims has resulted in increases in the cost of insurance and a reduction in the number of insurers willing to provide homeowners policies.
• Increases in construction and labor costs: Increased costs of construction materials and a shortage of skilled tradesmen have driven up construction costs, making it more expensive to rebuild or repair your home if it were damaged or destroyed. 
• Increases in home values: When home values increase, more insurance coverage is required to fully insure the home. Higher coverage amounts equal higher insurance premiums.
• Increases in the severity and number of natural disasters: Arizona has experienced increases in the severity of storms and natural disasters. This means our homes are more frequently exposed to natural disasters and catastrophic events, driving up insurance costs due to increases in the number of claims and severity of losses. Additionally, due to Arizona’s dry climate and expanding development in wildland-urban interfaces (the line, area, or zone where structures and other human development meet or intermingle with undeveloped wildland or vegetative fuels), many locations in Arizona are susceptible to wildfire. Summer monsoon storms also cause damage to homes through high winds and hail.  
• Selected coverage type, limits, and deductibles all contribute to premium cost: Homeowner policies are tailored to meet the coverage needs of individual homeowners. Every homeowner has decision points within a policy where they select coverage amounts and deductibles that all contribute to the final cost of the policy. If you select higher limits for your dwelling, personal property, loss of use, or liability coverage, you will see an increase in premium. This includes your decision to buy a policy that covers actual replacement cost versus receiving the market value of the home should it be lost entirely.

While in general, increases in homeowners insurance premiums are occurring statewide due to some of the conditions above, there is an elevated concern in forested areas and wildland-urban interface areas in Arizona due to the increased probability of a destructive wildfire occurring in these areas.

The predominant risk in Arizona is wildfire. It's normal to think of wildfire as being in forested areas, but desert areas may offer a significant risk as well. Insurance claims also result from monsoon storms that can bring high winds and hail that may result in damage to a structure. Additionally, water damage claims resulting from plumbing failures have been cited by insurers as causing a significant number of claims. The issue of risk to a property is not confined to a specific area. Insurers use a variety of data to determine risk and then price insurance coverage accordingly. 

While not covered by standard homeowners insurance, there is an increased risk of flooding in areas where a wildfire has burned. Flood is defined as water that enters the home from the outside at ground level and this type of coverage requires a separate policy that must be purchased in addition to homeowners insurance. Learn more about purchasing flood insurance.

Homeowners are the most important factor in reducing risk in Arizona. The reduction of risk is the necessary element to lowering insurance premiums in our state. There are many community mitigation tools and personal mitigation tools to address the wildfire issue. Homeowners are encouraged to become involved in community mitigation organizations such as Firewise USA®, Federal Emergency Management Agency (FEMA) programs, the Federal Alliance for Safe Homes (FLASH), or you can contact your local Fire Department/District to find out about community mitigation efforts in your area and also undertake as many personal mitigation efforts at your property as possible. If every homeowner does their part, the likely result would be significant risk mitigation, increased availability of homeowners insurance, and decreases in the overall cost of insurance. 

Additionally, homeowners should carefully evaluate the benefit of filing claims for losses they could cover themselves, leaving homeowners insurance to cover catastrophic losses. This may be a different thought process than in years past, but a new paradigm is required due to circumstances affecting the cost and availability of homeowners insurance.

There are no Arizona statutes that require homeowners insurance. However, mortgage lenders generally require homeowners insurance as an assurance that their financial interest is covered in the event of a loss.

These are individual decisions that are likely based on an individual’s financial situation. Homeowners who do not purchase homeowners insurance are considered self-insured, meaning that the individual homeowner is financially at risk in the event of a loss, rather than an insurance company. If an individual can’t afford insurance, they likely can’t afford to lose a house, which is possibly the most expensive asset they own. DIFI encourages homeowners to have insurance as it creates resiliency to recover financially from catastrophic loss. 

DIFI staff have participated in emergency resource centers when wildfire or flooding catastrophes occur, and have seen firsthand when homeowners chose not to purchase insurance, suffered a loss, and then regretted the decision

The number of homeowners without homeowners insurance is not data that DIFI collects because there is no requirement for reporting it to our agency.

Sometimes these terms are used interchangeably by consumers but there is a difference between a cancellation and a non-renewal. 

A cancellation is the termination of a policy by the insurer during the policy period. Insurers are only required to provide 5 days notice when canceling a policy.  Under Arizona insurance laws an insurer can only cancel a policy for the following reasons:

• Non-payment of premium
• Conviction of a crime arising out of acts that increase the risk
• Fraud or misrepresentation in obtaining the policy or filing a claim
• Negligent factors or omissions that increase the hazard insured against
• Substantial change in the risk 
• Failure of the insured to eliminate or reduce conditions of the premises that will increase the probability of future losses

Cancellations of homeowners insurance policies are uncommon in Arizona. However, these and any other reasons may be used to non-renew a policy. 

A non-renewal is the insurer’s decision to not renew a policy for a successive policy period. Non-renewals are much more common and insurers are required to provide at least 30 days’ notice of a non-renewal before the end of the policy period. An insurer may also condition a renewal on reduction of limits or elimination of certain coverages in the policy which also requires at least 30 days’ notice. 

There are over 100 insurance companies selling homeowners insurance in Arizona. Not all of these insurers will be offering coverage as they may be limiting their risk exposure in certain areas of the state.

If you believe your insurer is making a non-renewal decision that is based on inaccurate or outdated information, DIFI encourages homeowners to contact the insurer to obtain the specific data that was used for the determination and to provide the insurer with the data that you believe is correct.  

Keep in mind that insurers may want to reduce their risk exposure in certain areas based on the perils present and these decisions can result in non-renewal even when mitigation efforts have been undertaken at the property.

If an insurer decides not to renew your policy due to a specific condition related to your home or property, such as having trees and shrubs within 10 feet of your home, they must notify you of the condition and give you an opportunity to remedy it. If you remedy the condition within the specified time (usually 30 days) in a manner that is acceptable to the insurer, the policy must be renewed. If you have not remedied the condition before the policy expiration date but you have paid the renewal premium, the insurer must provide you with an additional 30 days to remedy the condition. 

It is important to understand that DIFI has no statutory authority to set or approve homeowners insurance rates in Arizona. DIFI does have statutory authority and processes in place to monitor rate increases and ensure insurance companies are complying with Arizona insurance laws. 

Insurance consumers are encouraged to pay close attention to the limits of coverage provided in a policy and ensure that they are appropriate – an agent can assist. Consumers are also encouraged to understand how deductibles (the amount the policyholder must pay out-of-pocket) can change the cost of insurance. 

DIFI’s mission is to protect consumers, provide certainty on regulatory matters, and perform with efficiency and integrity as good stewards of taxpayer resources. In furtherance of our mission, DIFI is focusing on:

• Helping consumers manage the severity of risks through public outreach and education. DIFI is committed to helping bridge the gap between insurers and consumers. We believe well-informed consumers can make better decisions regarding their coverage choices within homeowners' policies. Given that the mitigation of risk is so important in the final cost of insurance, DIFI is prioritizing sharing information on mitigation strategies and programs that may save consumers money.
• Encouraging the adoption of mitigation strategies to make communities more resilient to wildfires. DIFI is focusing on reducing risk because it offers a better chance of long-term sustainability of insurance markets in disaster-prone areas. Current mitigation initiatives and programs include addressing fire spread, accessibility, defensible space, water supply, etc. for buildings constructed near wildland-urban interface areas that are susceptible to wildfire.
• Working with insurers to recognize mitigation programs. When communities work together to implement risk mitigation strategies, those efforts may be recognized by insurers as part of the overall strategy to prevent the loss of individual homes in those communities. DIFI is committed to working with insurers to recognize these programs in ways that result in cost-savings to policyholders within those communities.
• Providing resources for homeowners to find coverage. DIFI maintains a list of insurers who have indicated a willingness to provide coverage in areas of the state at higher risk for wildfire. Not all insurers listed will provide coverage in all areas and some may not offer competitive prices, but DIFI will maintain this list of insurers to give consumers and agents leads on finding homeowners coverage. Additionally, those insurers who recognize mitigation efforts will be noted. 
• Encouraging direct consumer-insurer engagement. As changes occur in people’s lives, their insurance needs change as well. Annual insurance reviews, or “check-ups,” are a great way to communicate with your agent or insurance company to ensure existing coverages, deductibles, and limits remain the most appropriate for your specific needs. Learn more about questions to ask your homeowners insurance agent or company. 

If you have concerns regarding your policy and need help or would like to file a complaint, contact our Consumer Services Division at (602) 364-2499 or [email protected] to learn how we can further assist you.  

The issue of non-renewal and increased premiums for all types of insurance is not specific to Arizona. Many states are experiencing the same problems as Arizona homeowners. More frequent occurrences of severe weather events, combined with rising home values, and increased construction and labor costs are having a detrimental effect on insurers and consumers alike. Proactive approaches to mitigating risk by consumers, active and careful shopping, and understanding the policy provisions are important steps to take. Additionally, consumers are encouraged to:

• Speak with their agent to understand the types of risks an insurer looks at when determining whether or not to write the risk and what premium they will charge to write the risk.
• Decrease the severity of risk around their home; do everything possible to mitigate risk. Examples include creating defensible space, using fire-resistant materials to build, and mitigating the possibility of flood waters from entering your property. Homeowners may also consider the installation of a leak detector to mitigate the possibility of water damage inside the home.
• Get involved in organizations where they can become informed of wildfire/flood mitigation strategies.
• Be active in shopping and work with their agents to find those insurers willing to provide coverage and then compare those policy costs. It’s also important to remember that cost should not be the sole factor considered as adequacy of coverage and service are also important considerations. View Arizona licensed insurers who may offer coverage in areas of the state at higher risk for wildfire.   
• Beware of unscrupulous workers who show up at their residence uninvited after their home sustains damage, such as from a storm or wildfire. It is not uncommon after a community suffers widespread damage for individuals and companies to show up uninvited with offers to inspect and then fix the damage. These workers are often opportunistic and victimize homeowners and insurance companies through deficient work, costly bills to the insurer, and the possibility of the homeowner being asked to pay costs declined by the insurance company. Prior to engaging with anyone they did not invite, including independent adjusters, consumers should contact their insurer for an inspection of damage and a referral to a licensed contractor both the consumer and the insurer have confidence in.
• Prior to signing any agreement or contract with an individual representing themselves as a contractor or independent adjuster, ensure they are licensed, insured, and have a complaint history you are comfortable with. Contractor licenses can be found at https://roc.az.gov/ and adjuster licenses can be found at https://difi.az.gov/license-search.
• Understand that filing a claim for a loss that is close to the required deductible can result in increased premium at renewal. Filing a claim should be the last consideration as insurance is intended to address damage that cannot otherwise be financially covered out-of-pocket by the consumer (i.e. catastrophic events).
• Work closely with their insurance company or agent to ensure the company is making coverage decisions based on accurate information, ensure adequacy of insurance (not too much, not too little), and consider raising deductibles to lower premium costs. Deductibles (the amount the policyholder must pay out-of-pocket) can change the cost of insurance. 
• Understand the importance of reading and becoming familiar with the coverages included with their policy. As an example, the difference between “actual cash value” and “replacement” coverage of your home can be significant. Learn more about these differences.