California home insurance crisis: How wildfires are driving rate increases

Why is there a home insurance crisis in California?

California's home insurance market is struggling with increasingly destructive wildfires, particularly in areas with high-value homes where reconstruction costs are high. California has one of the most expensive housing markets in the country, with an average single-family home value of around $913,138 as of September 30, 2026, according to the Zillow Home Value Index.

Data from the California Department of Forestry and Fire Protection (Cal FIRE) shows that 14 of the 20 most destructive fires have occurred in the past 10 years. The 2025 Eaton and Palisades fires in Los Angeles are ranked second and third, respectively. Wildfires are now occurring outside of the traditional wildfire season that runs from May through October, according to the Western Fire Chiefs Association.

Max Dugan-Knight, a climate data scientist with Deep Sky Research, said, “Wildfires are now burning in all months of the year. They are also more destructive and more dangerous than they used to be due to climate change.”

Despite the problems, even the most expensive ZIP codes in California for home insurance are below the national average; Insurance.com data shows an average rate of $2,703 a year in Woodland Hills (91364), the most expensive ZIP code for home insurance in California. The national average is $2,872, and the state average is $1,653.

The California Department of Insurance can allow and deny insurance company requests to increase premiums. The goal is to prevent insurance companies from charging policyholders discriminatory and excessive premiums. However, this has led to insurance companies like State Farm choosing not to write new policies in the state.

When State Farm stopped selling new homeowners policies in California, it posted a statement to its website in 2023 where it cited “...historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market” as its reasons.

Dan Veroff, an attorney with the Merlin Law Group, says, “State Farm's viability in California is essential because the other insurers operating in the state have made clear that they cannot take on all of State Farm's customers if State Farm further non-renews policies. This would lead to a massive rush to the California FAIR Plan and potentially overwhelm and collapse the market.”

While State Farm may be the largest insurer of homes in the state to start pulling back, they’re not the only one. This puts strain on the remaining insurers and, as Veroff said, California’s FAIR plan.

Will California home insurance rates go up?

After the 2025 fires, multiple rate increases were approved by the CDI, including for CSAA, Mercury Insurance, Farmers, and State Farm. Furthermore, the California FAIR Plan is increasing rates by an average of 29.1%. Some of these companies have agreed to grow their policy count in the state in return for increases.

The table below shows companies with approved rate increases and their commitment to write new policies, if there is one, according to Cal Matters.

Insurer	Approved rate increase	Growth commitment (No. of policies)
CSAA Insurance Group (AAA)	Up to 10% ($71,465,447	0
Farmers Insurance	$150,491,236, plus 1.5% rate adjustment	5,596
State Farm	17%	0
Mercury	6.9% (2025) 12% (2026) $85,625,007	2,107
California FAIR Plan	29.1%	N/A
USAA	$114,772,140	0
Safeco (Liberty Mutual)	7.2%	Unknown

The 2026 Insurance.com Insurance and Climate Change survey found that 68% of California homeowners who responded said they had seen a rate increase in the past year. Of those, 53% believe the increase is related to climate change.

How is the California government addressing the insurance crisis?

California is addressing homeowners insurance problems through a combination of guidance from the CDI and legislation. The Sustainable Insurance Strategy aims to allow rate increases in return for a promise to write new policies, among other efforts.

At the beginning of August, the CDI completed its review of the Verisk Wildfire Model to inform how insurance companies set rates in wildfire-prone areas. The new system allows insurers to take wildfire modeling into account when setting rates; in return, the CDI requires that insurance companies offer coverage in high-risk areas.

“We’re proud to be the first catastrophe modeler to work with the California Department of Insurance to offer a modeled assessment of wildfire risk and contribute to efforts to bring stability to the insurance market,” said Rob Newbold, president of Verisk Extreme Event Solutions, in a statement.

The state Assembly passed the FAIR Plan Stabilization Act (AB 226), which would provide the FAIR Plan with more financial tools, including the ability to issue bonds. It would gain access to a line of credit if it needed additional funds.

What areas in California are most affected by the home insurance crisis?

The CDI recently released a map showing the counties with a high concentration of both FAIR plan policies (higher than 15%) and wildfires (more than 20% of properties in the county considered to be at high risk). The areas meeting these qualifications form an upside-down ‘U’ highlighting the northernmost quarter of the state and reaching down along California’s eastern and western borders. The CDI believes these are areas where traditional insurers have pulled back from insuring homes, requiring the FAIR plan to pick up the slack.

Remember, these are areas that meet both criteria. An area that isn’t highlighted may be at high risk for wildfires but not have a high concentration of FAIR policies or vice versa.

What to do if you are having difficulty getting homeowners coverage in California

If you’re having trouble getting homeowners insurance in California the state has an insurance option of last resort, the California FAIR plan. This association was established in the late 1960s to help homeowners find insurance when they couldn’t find a policy through traditional insurers. It considers itself a “temporary safety net” until homeowners can find a policy through a regular insurance company.

Policies sold through the FAIR plan are extremely limited compared to a more standard homeowners policy. FAIR plans will only cover losses due to a few named perils. In this case, those perils are limited to fire, lightning, internal explosion, and smoke. To obtain coverage, you’ll work with a broker associated with the FAIR plan. The broker will determine whether you are eligible for a FAIR plan.

The 2026 Insurance.com Insurance and Climate Change survey found that, of the respondents who had recently shopped for homeowners insurance, 57% reported finding it more difficult to obtain coverage, and 55% believe climate change is affecting the market. In California, climate change is driving the increase in wildfires, and fortifying your home can make it easier to get coverage.

Michael Ashker, Chairman and CEO of FortressFire, a wildfire assessment and mitigation firm, says that one thing homeowners can do is to perform risk mitigation on their property. “First, homes that are hardened against wildfire vulnerabilities are simply more insurable. If a home is less likely to burn, it’s a better bet for insurers.”

A few steps you can take to harden your home against wildfires include creating a buffer zone around it by removing flammable materials such as dead or dying trees and underbrush. You can also use of more fire-resistant materials on your house, such as slate or tile shingles on your roof and stucco or brick for your home’s exterior facade.

Sources:

California Department of Insurance. “L.A. County Wildfire Claims Tracker.” Accessed November 2026
Zillow. “Housing Data.” Accessed November 2026
CALFire. “Statistics.” Accessed November 2026
State Farm. “State Farm General Insurance Company: An update on California.” Accessed November 2026
State Farm. “State Farm General Insurance Company: California new business.” Accessed November 2026
Cal Matters. "Insurers say they're starting to write new California homeowner policies, but how many?" Accessed November 2026.
California Department of Insurance. “Sustainable Insurance Strategy.” Accessed November 2026

FAQ: California home insurance crisis

Are insurance companies still pulling out of California?

No, there have been no new reports of carriers leaving the state, although State Farm and Allstate are still not writing new policies. Other large insurers, including Chubb, Farmers, The Hartford, Travelers, and others, reduced their coverage in the state. However, some are returning to the market and writing more new policies in high-risk areas in return for rate increase approvals, including Farmers