Haris Ashley
Getting homeowners insurance in California can be challenging due to the state's high risk of wildfires and other natural disasters. The insurance industry's heavy investment in fossil fuels and failure to adjust underwriting models to account for mitigation efforts further exacerbates the issue. As a result, many Californians struggle to obtain affordable coverage, and the California FAIR Plan, the insurer of last resort, has gained prominence. This plan provides basic fire coverage when traditional carriers cannot, but it may not be a comprehensive solution. To navigate the complex insurance landscape, homeowners are advised to work with brokers or agents who can help them find the best coverage options and rates.
| Characteristics | Values |
|---|---|
| Purpose | To ensure all Californians have access to basic property coverage and peace of mind |
| Who is it for? | Californians who are unable to obtain coverage in the traditional insurance market |
| Type of coverage | Basic hazard coverage, fire coverage, theft liability, slip and falls |
| Cost | ~$2.3K per year (non-admitted carrier), ~$1500 per year (Geico/Stillwater), $4-8K per year (with claims history) |
| Challenges | Wildfires, natural disasters, high inflation, outdated state regulations, rising cost of insurance, unavailability of insurance |
| Alternatives | California Fair Plan, California Department of Insurance website, non-admitted carriers, insurance brokers |
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What You'll Learn
The California Fair Plan
The FAIR Plan is made up of all insurers licensed in California, and by statute, all admitted carriers in the state are part of the plan. Any licensed insurance agent or broker registered with the FAIR Plan can assist in purchasing fire insurance from the plan. The FAIR Plan covers owner or tenant-occupied dwellings with up to four family units and personal property for renters and condo owners. It also covers business-owned buildings, including habitational units, retail mercantile, manufacturing risks, farms, wineries, and office buildings.
In addition to basic fire coverage, the FAIR Plan also offers coverage for individually owned residential properties and personal property of tenants and condo owners through the California Earthquake Authority (CEA). If a customer is unable to secure a policy from another company, their broker can help them find a Difference in Conditions policy, which offers additional coverages to provide the equivalent of comprehensive homeowners insurance.
In recent years, the FAIR Plan has seen significant growth, with its residential enrollment reaching 556,000 in 2025. This increase is partly due to insurers pulling out of California's home insurance market due to the growing risk of climate change and catastrophic fires. However, the FAIR Plan has faced criticism for its handling of smoke damage claims, with a judge ruling in 2025 that its policy violates the state's insurance code by providing less coverage than what is required. As a result, the FAIR Plan is reviewing its policy language to reflect how claims have been adjusted.
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California's insurance crisis
California is facing an insurance crisis, with many residents unable to obtain homeowners insurance. This crisis has been driven by the increasing frequency and severity of natural disasters, such as wildfires, which have resulted in insurers refusing to renew or write new policies in the state. Between 2020 and 2022, insurance companies declined to renew 2.8 million homeowner policies in California. The problem is particularly acute in fire-prone areas, where development abuts wildlands, known as the wildland-urban interface.
In response to this crisis, the state has introduced new regulations to encourage private insurers to write policies in high-risk areas. These regulations include requiring insurers to factor in the cost of reinsurance policies when calculating rates. However, these policies are likely to result in higher premiums for homeowners.
The California FAIR Plan has served as a "last resort" insurer for those unable to obtain coverage elsewhere. FAIR provides basic fire coverage and is funded by the policies it sells to customers. However, FAIR has also faced financial stability concerns, with a risk of running out of money due to claims from the LA fires. Lawmakers have proposed adding state officials to the FAIR Plan's governing committee to improve its solvency and ability to serve a growing number of customers.
Obtaining homeowners insurance in California has become increasingly challenging, with residents reporting difficulties in finding affordable policies, especially with a claims history. Some have turned to non-admitted carriers or the FAIR Plan as a last resort. The FAIR Plan has seen a significant increase in policies, with total policies more than doubling from 2018 to 2022.
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Using an insurance broker
Homeowners insurance is not legally required in California, but mortgage lenders may require it as part of your loan agreement. When considering homeowners insurance in California, it is important to note that the state's varied terrain comes with varied risks, from wind damage due to desert windstorms and tropical storms to wildfires and flooding. These risks may not be covered by a standard homeowners insurance policy.
If you are struggling to obtain homeowners insurance in California, you may want to consider using an insurance broker. Insurance brokers in California must be licensed by the California Department of Insurance as either a Property and Casualty Broker-Agent or a Personal Lines Broker-Agent. There are no additional costs for using an insurance broker.
There are two main types of insurance broker in California: captive agents and independent agents. Captive agents represent a single insurer or a small group of insurers and are obligated to submit business to that company or companies. Independent agents, on the other hand, are not appointed to represent specific insurance companies and can place coverage with any admitted insurance company based on a client's needs.
To find an insurance broker in California, you can try calling insurance companies directly, using the Yellow Pages, or checking company websites or social media. Contacting an agent association, such as the National Association of Insurance and Financial Advisors-California (NAIFA-California) or the Western Insurance Agents Association, can also help you locate a local broker. Once you have found a broker, you can check their license status using their name or license number.
When working with a broker, they will perform a diligent search for comprehensive coverage in the traditional marketplace. If they are unable to find you insurance through another company, they can assist you in applying for a policy through the California FAIR Plan, which provides basic fire coverage when it is not available from a traditional carrier. You can also work with a broker to find a Difference in Conditions (DIC) policy, which can provide additional coverages to give you the equivalent of comprehensive homeowners insurance.
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Purchasing from a non-admitted carrier
Purchasing a policy from a non-admitted carrier is an option for homeowners insurance in California. Non-admitted insurers are not licensed by the state but can operate if they meet certain financial requirements. They have more flexibility in designing their policies since they don't have to follow strict state regulations. This means they can often offer broader coverage options, customizable policies, and access to specialized markets that traditional insurers may not provide.
However, choosing a non-admitted insurer comes with potential risks. They do not contribute to the state's insurance guarantee fund, so if a non-admitted insurer goes bankrupt, homeowners are not protected and may be left without a safety net. Additionally, non-admitted insurers may charge higher costs, especially for high-risk homes. Therefore, it is crucial to carefully research the financial stability of a non-admitted insurer before purchasing a policy. Reputable agencies like A.M. Best provide financial ratings to help assess the risk of choosing an unstable company.
In some cases, homeowners may opt for a hybrid policy, combining coverage from an admitted insurer with a non-admitted carrier. This can provide the benefits of broader coverage while maintaining some level of financial protection. The California Fair Plan, for example, offers basic fire coverage when it is unavailable from traditional carriers, and it is comprised of all admitted insurers in the state.
When considering a non-admitted insurer, it is recommended to work with a knowledgeable insurance broker to help navigate the trade-offs between coverage options, financial protection, and risk. They can assist in finding appropriate coverage and ensuring peace of mind for homeowners.
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California Department of Insurance website
The California Department of Insurance website is a valuable resource for homeowners looking to purchase insurance in California. It offers a wealth of information and tools to help you navigate the process of obtaining homeowners insurance. Here's a step-by-step guide on how to utilize the website to get homeowners insurance in California:
Start by visiting the California Department of Insurance website at insurance.ca.gov. The site provides a comprehensive overview of insurance rights and offers resources in multiple languages.
From the homepage, you can access the 'Consumers' section, which is tailored to help individuals with their insurance needs. Under the 'Types of Insurance' heading, select 'Homeowners Insurance.' This section offers a detailed guide to homeowners insurance, including information on coverage types, common terms and definitions, and a list of licensed homeowners insurance companies in California. It also provides essential tips and suggestions to help you make informed decisions.
The website emphasizes the importance of shopping around and comparing quotes from different insurance companies. You can utilize the 'Company Complaint Comparison' feature to evaluate companies based on customer satisfaction and the number of complaints filed. This tool allows you to make an informed decision about which insurance company to choose. The website also provides a 'Homeowners Insurance Premium Comparison Survey,' which gives you an idea of the range of premiums charged by different insurers in the state.
Another critical aspect covered by the website is understanding your rights as a consumer. The California Department of Insurance outlines the rights of homeowners insurance policyholders, including the right to receive a copy of your policy, the right to timely claims handling, and the right to a fair settlement. Knowing your rights empowers you to navigate the insurance process with confidence.
The website also offers resources to assist you in the event of a dispute or problem with your insurance company. It provides information on how to file a complaint, the process involved, and the potential outcomes. Additionally, the website offers tips on preventing and resolving disputes, emphasizing the importance of maintaining open communication with your insurance company.
Finally, the California Department of Insurance website provides contact information for various resources and organizations that can offer further assistance. This includes the Consumer Services Division of the Department of Insurance, which can provide personalized assistance and answer any specific questions or concerns you may have.
By utilizing the tools and information provided by the California Department of Insurance website, homeowners in California can make informed decisions, understand their rights, and confidently navigate the process of obtaining homeowners insurance. It serves as a valuable resource, ensuring consumers are well-informed and protected throughout their insurance journey.
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Frequently asked questions
The California FAIR Plan is an insurer of last resort. It provides basic hazard coverage, including fire insurance, when homeowners are unable to get other policies.
If you're unable to secure a home insurance policy, try using the California Department of Insurance website's homeowners insurance search tool to find companies, agents, and brokers offering coverage in your area. Your best option may be to work with an insurance broker who can shop with multiple companies on your behalf to help you find the best combination of coverage and price.
The cost of homeowners insurance in California varies depending on various factors, including the value of the property, the location, and the level of coverage required. Some people have reported paying around \$1500 per year for insurance on a \$2.5 million property, while others have mentioned premiums ranging from \$4000 to \$8000 per year.
There are a few reasons why it may be challenging to obtain homeowners insurance in California. Firstly, the state has experienced numerous catastrophic losses due to natural disasters, such as wildfires, which have impacted insurance companies and their willingness to provide coverage. Additionally, insurance companies have been accused of not adjusting their underwriting models to account for mitigation efforts, such as forest treatment, which reduces the risk of severe wildfires.
