California Wildfires Highlight Nation’s Home Insurance Crisis
Altadena, California — The nation’s growing home insurance crisis is in sharp focus as Californians begin the long and arduous process of rebuilding after the deadly Eaton and Palisades wildfires. For neighbors Louise Hamlin and Chris Wilson, the stark contrast in their insurance coverage underscores the inequities of this recovery.
Hamlin, who had private insurance, has already received nearly a million dollars in payouts and is actively seeking contractors to rebuild her home. Wilson, on the other hand, will receive only a fraction of what he needs because he was insured under the California Fair Access to Insurance Requirements Plan — the state’s minimal insurance program, commonly known as the FAIR Plan. Faced with this shortfall, Wilson is considering loans, potential lawsuits, and even moving his family out of California.
How the FAIR Plan Works
The FAIR Plan is designed as a temporary safety net, a last resort for homeowners unable to secure private insurance. More Californians are turning to it than ever before, a reflection of the fact that several major insurance companies have either paused or restricted new business in the state in recent years.
In Wilson’s case, after he offered to install fire mitigation measures at his property, his private insurer declined to renew his policy. When no other insurers were willing to write him a new policy, Wilson was forced into the FAIR Plan to meet his mortgage requirements.
The increasing reliance on the FAIR Plan is evident in the numbers. Between 2020 and 2024, the number of FAIR residential policies issued in the state more than doubled, reaching almost 452,000 policies.
Higher Premiums, Less Coverage
Under the FAIR Plan, Wilson paid approximately 60% more in premiums related to the fire than his neighbor Hamlin, yet is slated to receive less than half the coverage. The true cost of his home insurance was even higher because he also had to purchase “wrap-around insurance” to address issues not covered by the FAIR Plan, such as burst pipes or falling objects.
The Insurance Information Institute, representing numerous major insurers, emphasizes that the FAIR Plan offers a lifeline for homeowners who cannot find private insurance. The institute suggests that the situation would be significantly worse if homeowners had no coverage whatsoever.
Potential Solutions
To address the crisis, state officials have introduced new regulations to give insurers more flexibility to increase premiums in exchange for issuing more policies in high-risk areas. This includes allowing insurers to take climate change into account when setting prices and permitting them to pass on reinsurance costs to consumers in California. Stephen Collier, a professor of urban planning at the University of California, Berkeley, stated that governments must also bear the costs of critical mitigation efforts. Otherwise, the financial burden of California’s fire risk will remain unequal and continue to fall on homeowners.
California is proposing to allocate approximately $25 million from a voter-approved climate bond to reinforce fire mitigation requirements around homes.
By SALLY HO and TRÂN NGUYỄN
