California Homeowners Insurance in Crisis: What You Need to Know in 2025
If you're a California homeowner, you've likely felt the heat—literally and figuratively.
With wildfires becoming more frequent and severe, the state's homeowners insurance market is undergoing significant upheaval. Premiums are soaring, coverage is becoming harder to obtain, and many are left wondering: What's going on?
The Current Landscape
In recent years, California has witnessed devastating wildfires, leading to substantial insurance claims. For instance, Everest Group reported a 71% decline in first-quarter profits in 2025, primarily due to underwriting losses from California wildfires, with estimated economic losses reaching up to $250 billion.
As a result, major insurers like State Farm have stopped accepting new applications for home insurance in California, citing wildfire risk and rising construction costs. This has forced many homeowners to turn to the California FAIR Plan—the state’s insurer of last resort—which offers limited coverage at higher premiums.
Legal and Regulatory Developments
In response to the crisis, California’s Insurance Commissioner Ricardo Lara introduced new regulations in late 2024 to help stabilize the market. These include:
Allowing insurers to use catastrophe modeling to more accurately price wildfire risk.
Permitting insurers to pass reinsurance costs directly onto consumers.
While these changes may help keep insurers in the market, they will likely result in even higher premiums. On top of that, the FAIR Plan has issued a $1 billion assessment on insurance companies to cover wildfire losses—costs expected to be passed down through temporary consumer fees.
What Homeowners Can Expect
In this evolving environment, homeowners should be prepared for:
Higher premiums across the board
Fewer choices and increased reliance on limited FAIR Plan coverage
Tighter underwriting, requiring home hardening or mitigation strategies to maintain insurability
How to Protect Yourself
It’s never been more important to take a proactive approach. Here are four steps to help you navigate the uncertainty:
Review your policy annually – Know what is (and isn’t) covered.
Take mitigation seriously – Invest in fire-safe improvements that could lower risk and improve your chances of keeping coverage.
Work with experienced professionals – Independent insurance brokers and financial advisors can help assess your specific risks and options.
Plan holistically – Understand how your home, insurance, and overall finances fit together.
Why Work With a Financial Advisor Right Now?
A comprehensive financial plan doesn’t just look at investments and retirement—it helps you manage all areas of risk, including your home and property. If you're unsure how increasing premiums, reduced coverage, or disaster-related expenses could affect your finances long-term, this is the time to talk to an advisor.
An advisor who understands the full picture can help you:
Evaluate how much insurance you really need
Plan for potential out-of-pocket costs after disasters
Make informed decisions about home upgrades or relocation
Coordinate with your insurance broker to align financial and coverage strategies
If you're feeling uncertain about how California's insurance landscape could impact your financial future, reach out. You're not alone—and you don’t have to figure this out on your own, either.
