Already in 2025, devastating flash flooding has claimed hundreds of lives and destroyed billions in property. And for most of those who lost homes, there will be no insurance payout to rebuild their lives.
Meanwhile, wildfires have wreaked similar havoc in other parts of the country. Fire is the primary reason homeowners insurance exists; home insurance as we know it today has its roots in the creation of the first fire insurance policies following the Great Fire of London in 1666. Fire remains one of the main perils covered by homeowners insurance.
Standard homeowners insurance does not cover flooding, and it has not since the 1960s, when the last few private insurers phased out the coverage. In response, the federal government established the National Flood Insurance Program to make coverage available to homeowners.
There are signs that fire coverage may be going the way of flood coverage. As climate change creates more severe weather, insurance companies are backing away from risk. What does that mean for homeowners? Knowing is more important than ever.
Why does homeowners insurance cover fires and not floods?
Homeowners insurance is based on early fire insurance policies. Over the years, other perils were added to the policies, eventually leading to the homeowners insurance policy as we know it, which covers a wide variety of perils and even includes liability insurance and loss of use.
These package policies appeared around the same time that flood insurance started disappearing from private insurance coverage. Insurers saw that the risk of widespread damage from natural disasters like floods was simply too high.
Fires, while devastating, no longer present the risk they did before the 20th Century, with better home construction materials and building codes, fire departments and smoke detectors all preventing entire cities from burning as they did in the past. But wildfires are changing that.
Could homeowners insurance companies stop covering fire?
The catastrophic losses in California in early 2025 underscore the growing financial risk to insurance companies presented by fire. And there are signs that wildfire coverage may go the way of flood insurance.
State Farm announced last summer that it would renew homeowners insurance policies previously slated to be nonrenewed, but without fire coverage included. Moves like this from multiple insurance companies would leave a lot of homeowners looking to buy fire coverage from the state FAIR plan.
The decision to stop covering fires in high-risk areas would reduce insurance rates, but homeowners would still be left seeking protection for fires elsewhere. Buying another policy doesn’t save the homeowner any money, especially since FAIR plan insurance isn’t known for being cheap.
Similar issues have already presented themselves in hurricane-prone areas; homeowners in parts of Texas, Florida and Louisiana buy wind coverage as a separate policy or endorsement. That’s in addition to the flood insurance they need to be fully covered in a hurricane.
So yes, it’s possible for homeowners insurance companies to stop covering fire, or at the very least to stop offering policies that include fire coverage in certain areas.
What should homeowners know about the future of home insurance for natural disasters?
Homeowners in high-risk areas already see the results of a struggling home insurance market, but no part of the country is safe. Homeowners need to be aware of not only the potential for rate increases, but for changes in their coverage.
There are a few things you can do to stay on top of your coverage.
Review your policy on every renewal
When your renewal comes, it will include any changes that were made to the policy since the last renewal. Look for any changes in coverage or exclusions that will affect what’s covered by your policy.
You should also review your dwelling coverage; the amount should increase each year to keep up with the cost of rebuilding a home. Ensure it’s accurate.
If you’re confused by any changes, call your insurance company right away.
Know your exclusions
Many homeowners are unaware that a standard home insurance policy doesn’t cover flooding. While recent floods in the news have made that knowledge more common, there is still a lot of confusion and general misinformation.
In addition to floods, homeowners insurance excludes earth movement, and that doesn’t just mean earthquakes. Landslides and mudslides are also considered earth movement. Additionally, things like water and sewer backup are also commonly excluded.
You can buy additional coverage or separate policies for some of these things, and you should seriously consider flood insurance at the very least.
You can make your home more insurable
There are things you can do to reduce the likelihood of losing coverage for, or paying more for, fire, wind and other coverage.
Updating and upgrading your home isn’t just an investment in its market value; it’s an investment in its insurability for the future. Depending on where you live, you might want to consider:
- A hail- or wind-resistant roof, or fire-resistant roofing
- Storm shutters
- Hail- or fire-resistant siding
- Clearing debris and removing trees that are too close to your house
- Ember-resistant vents
- New windows and doors
In some states, insurance companies are required to offer discounts for certain mitigation efforts. But even without a discount, a new roof will always mean cheaper insurance.
The future of home insurance
The future of home insurance, how it will work and what it will cover is uncertain. While it’s unlikely that insurance companies will stop covering fire on a large scale like they did with floods, it’s possible there will be reductions in coverage, additional limitations and deductible changes.
As with hurricanes and windstorms, insurance companies may start charging a separate fire deductible in some areas. The same may start to apply to wind and hail in a broader area.
The best thing homeowners can do is stay informed about the changes and keep their homes as insurable as possible.
