
California Home Insurance Crisis: Causes, Challenges, and Solutions
The California home insurance crisis is real, with homeowners facing unprecedented challenges in securing and maintaining coverage. This crisis has been brewing for years, but recent wildfires have brought it to a boiling point. Insurance non-renewals have become the norm, and I speak from personal experience with multiple properties. Let’s explore the current state of affairs, the reasons behind the crisis, and the steps being taken to address it.
The State of Home Insurance in California
The numbers paint a stark picture of the insurance landscape in California:
- From 2020 to 2022, insurance companies chose not to renew 800,000 homeowner policies in California, including 531,000 in Los Angeles County alone.
- In July 2024, State Farm dropped about 1,600 policies in the Pacific Palisades area.
- Out of the 5 buildings we own, the insurance is up for renewal for 2 buildings. For both of these buildings, we have received non-renewals from the existing insurance companies. One of the buildings is in Southern California and the other is in Northern California. Guard and Nationwide are the companies that have decided not to renew despite not having any claims on the properties in the past 5 years.
The California Fair Plan
The California FAIR Plan is a state-mandated insurance pool designed to provide basic fire and property insurance to homeowners who cannot obtain coverage through traditional insurance carriers. Unfortunately, many homeowners are being forced to rely on it due to a lack of alternatives.
The plan typically comes with higher premiums and reduced coverage, making it a less-than-ideal solution. Shown below is an example of the California FAIR Plan for one of our properties, where the quoted premium is roughly double the original insurance quote.

Reasons Behind the Insurance Exodus
Several factors have contributed to insurance companies’ decisions to limit or cease operations in California:
- Increasing Natural Disasters: California has experienced a notable increase in the frequency and magnitude of natural disasters, particularly wildfires. The Camp Fire of 2018, which covered 153,336 acres and destroyed almost 20,000 structures, is just one example of the catastrophic events insurers face. As of January 13, 2025 the wildfires in Pacific Palisades burned 23,713 acres, destroyed 1,105 structures and damaged 179 more structures. As of January 9th, 2025 The Eaton Fire had burned 10,600 acres.
- Rising Costs: General inflation has increased the cost of claims, as rebuilding homes after disasters becomes more expensive. Additionally, the cost of reinsurance (insurance for insurance companies) has risen dramatically.
- Regulatory Challenges: California’s strict regulations make it difficult for insurance companies to adjust their rates in response to increasing risks. This has led to profitability issues for insurers operating in the state.
- Market Volatility: The combination of these factors has created a volatile market, leading to disagreements between homeowners, insurance companies, and regulatory agencies over pricing issues and future market projections.
State of California’s Mitigation Efforts
California Insurance Commissioner Ricardo Lara has implemented several measures to address the crisis:
- Mandatory Moratoriums: A one-year moratorium on non-renewals and cancellations for homeowners affected by recent fires, such as the Palisades and Eaton fires.
- Extended Protection: A call for insurance companies to suspend pending non-renewals and cancellations that homeowners received 90 days before the fires started.
- Regulatory Reform: Implementation of new regulations to expand insurance coverage across the state, addressing outdated rules that have contributed to higher costs and fewer policies.
- Long-term Strategy: Commissioner Lara aims to see changes in the market by mid to late 2025, with more companies returning to the state and potentially driving down costs.
While these reforms are designed to increase insurance availability and stabilize the market in the long run, Californians may face higher premiums and limited options in the interim as the insurance market adjusts to these new regulations and climate-related risks.
Conclusion
The California home insurance crisis is a complex issue with no easy solutions. The impact of wildfires on insurance has been equally devastating, leaving many homeowners with few options. For battered homeowners, the California FAIR Plan often becomes the only choice for coverage, which is far from an ideal solution and highlights the urgent need for change. While the state government is taking steps to mitigate the problem, the long-term stability of California’s insurance market remains uncertain. Homeowners continue to face challenges in finding affordable coverage, and insurance companies struggle with profitability in a high-risk environment.
As we look towards the future, it’s clear that addressing this crisis will require a delicate balance between protecting homeowners, ensuring the financial viability of insurance companies, and adapting to the increasing risks posed by climate change. The success of these efforts will be crucial in determining the future of home ownership and insurance in the Golden State.
Leave a Reply