California's home insurance market is in crisis. Policy costs have climbed 84% since the end of 2020, seven of the state's 12 largest insurance companies have cut back or stopped selling new policies, and homeowners are losing coverage in neighborhoods that have never burned.
Two things got California here. Wildfires became more frequent and far more expensive to pay for. At the same time, state rules made it slow and difficult for insurance companies to raise prices to match that risk. Rather than lose money, many stopped selling new home insurance in California instead.
What's driving California's home insurance crisis?
The main driver of California’s home insurance crisis is wildfire. Fires have grown more frequent and more destructive, and rebuilding costs have risen alongside them. As homeowners in fire-prone areas filed larger and more frequent claims, insurance companies started losing money on California policies.
California's rate rules made that harder to fix. Under Proposition 103, passed by voters in 1988, insurance companies have to get state approval before changing their rates — a process that can drag on for months. Companies that couldn't raise prices fast enough to match the risk they were taking on chose the other option available to them: selling fewer policies. Seven of California's 12 largest home insurance companies have since reduced or halted new business in the state.
There's a third factor most homeowners never see. Insurance companies buy their own coverage, called reinsurance, to protect against catastrophic losses. Reinsurance got significantly more expensive as wildfire risk climbed, and until recently California was the only state that didn't let companies reflect those costs in their rates.
How California's home insurance crisis affects homeowners
California used to be a relatively affordable place to insure a home, even with the state's high cost of living. That changed fast. Higher policy costs (called premiums) are only part of it. Deductibles — the amount you pay out of pocket before coverage kicks in — climbed from an average of $1,813 to $2,553 between 2020 and 2026. That's roughly $740 more a homeowner has to absorb before insurance pays anything on a claim.
Availability is the harder problem. As companies pulled back, cancellations and nonrenewals spread past the highest-risk ZIP codes. Condo owners are getting dropped, too.
That has pushed a lot of people onto the California FAIR Plan, the program homeowners fall back on when no insurance company will cover them. FAIR Plan enrollment nearly tripled, with FAIR Plan policies now showing up in moderate- and low-wildfire-risk areas at twice the plan's overall market share. And because FAIR Plan rates are rising, even bare-bones backup coverage is getting expensive for homeowners.
What California is doing to fix the home insurance crisis
Since 2023, the California Department of Insurance (CDI) has rolled out a package of changes called the Sustainable Insurance Strategy, meant to bring insurance companies back to the state.
-
The core trade-off: Insurance companies can now use forward-looking computer models that project future wildfire risk, instead of relying only on what's burned in the past. In exchange, they have to be nearly as active in wildfire-distressed ZIP codes as they are statewide.
-
Faster rate decisions: CDI is working to speed up its rate approval process, which has historically been one of the slowest in the country.
-
Rewards for home hardening: Programs like Safer from Wildfires let homeowners earn insurance discounts — or move off the FAIR Plan and back to the traditional market — by upgrading their homes to better resist fire.
Separately, California now requires a one-year pause on cancellations and nonrenewals for homes inside or next to a wildfire burn area after the governor declares a state of emergency.
How to get and keep home insurance in California
If you're struggling to find affordable home insurance in California, there are steps you can take to make your home easier to insure — and to hold onto the policy you already have.
Harden your home against fire
Home-hardening measures like upgraded roofing, defensible space, and vent screens could qualify you for discounts or for better coverage options, particularly if you're currently on the FAIR Plan.
Review your coverage every year
Don't wait for a nonrenewal notice. Keep track of your home insurance cost from year to year, and set a reminder to compare options once a year so you know whether your policy is still the right fit for your situation.
Shop around, with or without an agent
You can compare home insurance options on your own or work with an independent agent or broker to find the right fit for your budget and needs.
Know what your FAIR Plan policy doesn't cover
If you've landed on the California FAIR Plan, it's worth knowing what you're missing. FAIR Plan policies cover fire and smoke damage, but not theft, water damage, or liability if someone gets hurt on your property. Most homeowners on the plan pair it with supplemental coverage (called a difference in conditions policy) to fill those gaps, so ask an agent what a companion policy would cost before assuming you're fully covered.
Frequently asked questions
Does California have a home insurance crisis?
Yes, California is experiencing a home insurance crisis defined by growing rates of cancellation, nonrenewal, and denial for homeowners in wildfire-affected areas. Home insurance is becoming less accessible and affordable statewide as insurance companies struggle to remain profitable in the face of increased wildfire risk and slow-moving regulatory processes. Insurance Commissioner Ricardo Lara has instituted a new Sustainable Insurance Strategy initiative to stabilize the market, improve coverage availability, and reduce reliance on the state’s insurer of last resort, the California FAIR Plan.
Does insurance cover California wildfires?
Standard home insurance covers wildfire damage in California. Homeowners affected by recent wildfires were able to file claims with their home insurance providers to cover losses. However, the scale of wildfire losses in recent years has contributed to slow payouts and frequent cancellations and nonrenewals for fire victims, pushing a growing number of homeowners to the FAIR Plan for basic coverage.
Was fire insurance canceled in California?
Fire insurance is still available in California as a basic component of standard home insurance. However, a growing number of insurers have canceled or nonrenewed policies, particularly in wildfire-affected areas, to reduce their overall risk exposure. In 2018, California Insurance Commissioner Ricardo Lara — who at the time was a state senator — led an initiative to implement temporary moratoriums on cancellations and nonrenewals for one year after declared wildfires. Insurance companies may still reduce business in fire-prone areas after the one-year moratorium has passed, though.
How much is homeowners insurance on a $450,000 house in California?
According to the latest data available from the Consumer Federation of America, a home with $450,000 in dwelling coverage in California costs an average of $2,182 per year to insure. However, how much you pay for home insurance will vary widely based on wildfire risk and location, along with several other factors.
