Affording Home Insurance in Paradise, California

Published Date: 11/18/2023

Can Homeowners in Paradise, California, Afford to Rebuild?

When Risk, Emotion, and Economics Collide in the Insurance Market

In the wake of California’s devastating wildfires, few names evoke more heartbreak than Paradise. Once a serene foothill community, Paradise was nearly erased by the 2018 Camp Fire, one of the deadliest wildfires in U.S. history. Forty-two people lost their lives, thousands of homes were destroyed, and the entire town became a symbol of both tragedy and resilience.

Years later, residents are still asking the same haunting question: How can we rebuild when we can’t afford insurance?

In a recent episode of Insurance Hour, host Karl Susman tackled this emotional and complex issue — not just as an industry expert, but as someone grappling with the human and economic realities of rebuilding in places where the risk has changed forever.

The story of Paradise isn’t just about one town. It’s about how we, as a society, decide where and how to live as the line between “safe” and “risky” continues to blur.

The Problem: Insurance Costs That Have Skyrocketed

Susman began by referencing a recent article titled “How Are People Supposed to Rebuild Paradise When Nobody Can Afford Home Insurance?”

The article detailed how residents returning to rebuild their homes are encountering staggering insurance quotes. One woman reported that her annual premium had jumped from $1,200 to $9,700 — a nearly eightfold increase.

That kind of price hike isn’t just painful; it’s prohibitive. For many families, insurance is no longer a manageable expense — it’s an existential barrier to homeownership.

Susman’s reaction was candid and conflicted:

“I’m not sure if I should feel sad, angry, or just confused. Should I be blaming the industry? The Department of Insurance? Or maybe the reality is that this is simply how risk works?”

The Emotional Toll of Loss

Before analyzing the economics, Susman reminded listeners that behind every policy and premium is a person — or in Paradise’s case, an entire community.

“These are people who didn’t just lose their homes,” he said. “They lost their neighbors, their memories, their sense of safety. The trauma of that can’t be overstated.”

The aftermath of the Camp Fire required two morgues, DNA testing, and months of recovery. Many survivors not only lost physical possessions but also suffered long-term emotional and psychological scars.

So, when those same residents attempt to rebuild and find that their new insurance costs are five times higher, the pain is compounded. They feel penalized for wanting to come home.

Why Insurance Prices Soar After Disasters

To understand why these premiums climb so dramatically, it’s important to look at how insurers calculate risk.

Insurance is, at its core, a financial bet — a transfer of risk from an individual to a collective pool. The insurer promises to pay if disaster strikes, and in exchange, the homeowner pays a premium that reflects the likelihood and potential cost of that loss.

When a fire like the Camp Fire obliterates an entire town, it fundamentally alters the data on which insurers base those calculations.

Before 2018, Paradise might not have been classified as a “high-risk” fire zone. But after losing nearly everything, the risk profile of the area changed permanently. From an insurer’s perspective, it’s now a proven hotspot — and the math behind pricing must reflect that.

As Susman put it:

“If I were a private investor taking on this risk with my own money, I have to be honest — I wouldn’t be eager to insure that area again. The probability of another loss is just too high.”

That’s not cynicism — it’s actuarial logic.

The Harsh Truth: Market Forces Always Find Equilibrium

While it might sound cold, Susman explained that the insurance industry — like any market — eventually self-corrects through economics.

If a region becomes too costly to insure, companies either withdraw or raise rates until the market balances risk and reward.

“The industry will figure it out,” he said. “It’ll become cost-prohibitive to live there, not because of regulations or building bans, but because insurance makes it unaffordable.”

That’s capitalism’s way of signaling unsustainable behavior. When it’s too risky to live somewhere, insurance pricing eventually reflects that reality — often more effectively than government zoning laws.

The result? A natural economic deterrent against rebuilding in areas that are repeatedly destroyed by natural disasters.

Should People Rebuild in Paradise?

This is where the debate turns personal and philosophical.

For many survivors, rebuilding in Paradise isn’t just about property — it’s about identity, belonging, and the determination to reclaim what was lost. The desire to return home is deeply human.

But Susman poses a difficult question:

“Would I want to live there again? Maybe the universe is trying to tell me something — that this just isn’t the right place to hang my hat at night.”

It’s not a judgment — it’s a reflection on how emotion and logic collide when loss meets risk. For some, staying is an act of courage. For others, leaving is an act of wisdom.

The Policy Challenge: Can Regulation Bridge the Gap?

California officials have floated several policy ideas to make insurance more accessible in high-risk areas. These include:

• Rebuilding with fire-resistant materials and updated safety standards.
• Adjusting zoning and building codes to discourage development in extreme-risk zones.
• Expanding state-backed insurance programs like the FAIR Plan, which offers limited coverage when private insurers won’t.

But as Susman points out, regulation alone can’t overcome physics or economics.

Even if the state mandates availability, private insurers still must remain solvent. They can’t pay out billions in claims each year while charging the same rates as before. Without rate flexibility and accurate risk modeling, insurers will simply exit the market — leaving homeowners with few options and little competition.

In short, you can’t legislate away risk.

The Human Side of Risk

Susman doesn’t dismiss the emotional side of this dilemma. His empathy for the people of Paradise is clear throughout the discussion.

He wonders aloud: What makes someone want to rebuild in a place that burned to the ground?

Is it community? Memory? Denial? Hope?

For residents who lost everything, returning can represent defiance — a refusal to let tragedy define them. But that same determination can also trap families in financially untenable situations.

As he put it, “It’s spinning around in my head and it’s really bothering me.”

This tension — between heart and head, between resilience and risk — sits at the core of the California insurance crisis.

The Uncomfortable Truth: Some Places May Be Uninsurable

Though difficult to admit, there may be parts of California — and beyond — where the combination of climate risk, terrain, and cost makes long-term habitation unsustainable.

That doesn’t mean people shouldn’t live there. But it does mean they may have to do so with different expectations: limited coverage, higher premiums, and more personal risk.

It also raises broader policy questions:

• Should the government subsidize insurance in extreme-risk areas?
• Should building permits be restricted in zones that have repeatedly burned?
• Should homeowners be required to mitigate risks (e.g., defensible space, fire-resistant materials) before being eligible for coverage?

There are no easy answers. But the future of insurance in fire-prone California will depend on how policymakers, insurers, and residents confront these realities — honestly and collectively.

The Bigger Picture: A Statewide Warning

Paradise is a cautionary tale for the rest of California. The same dynamics — rising risk, soaring premiums, and regulatory friction — are playing out statewide.

The town’s tragedy forced the world to see what happens when nature outpaces our ability to prepare. And now, the rebuilding process is revealing what happens when economics catch up to that reality.

“The industry isn’t being cruel,” Susman said. “It’s responding to data. And that data says: the risk is higher.”

That truth might be uncomfortable, but ignoring it doesn’t make it go away.

Final Thoughts: The Price of Paradise

Paradise, California, lives up to its name in both beauty and irony. It’s a place people love deeply, yet one that now embodies the new reality of living on the climate frontier.

Rebuilding there — or in any high-risk area — will never be cheap. The question is not whether insurance can make it affordable, but whether society can redefine what “affordable” means in a world where nature is rewriting the rules.

Susman closes with an invitation — not just to the people of Paradise, but to all Californians:

“Tell me what makes you want to rebuild there. What makes you feel comfortable staying? I want to understand.”

It’s a call for dialogue — not blame. Because as California’s insurance crisis deepens, the only path forward lies in understanding: of risk, resilience, and the very real human desire to call a place home.