For months, California homeowners have faced a grim reality: major insurers pulling back from the state’s market, skyrocketing premiums, and limited access to coverage in wildfire-prone regions.
Now, there’s finally a glimmer of good news.
As CBS 8 (KFMB) reported, State Farm — which previously announced it would non-renew approximately 30,000 homeowners policies across California — now says that some affected customers may be able to keep coverage through a companion policy paired with the California FAIR Plan.
Insurance expert Karl Susman joined CBS 8’s David Gotfredson to explain what this means for homeowners, how Difference in Conditions (DIC) policies work, and why this partial return could signal the early stages of broader market recovery.
State Farm’s Partial Reinstatement Explained
Earlier this year, State Farm made national headlines after announcing it would not renew tens of thousands of California homeowners policies, citing wildfire losses, rising reinsurance costs, and regulatory delays.
The company has now introduced a companion option known as a Difference in Conditions (DIC) policy.
“The DIC policy is a homeowners policy excluding the peril of fire,” Gotfredson explained. “It covers everything except fire damage.”
That means homeowners must still secure fire coverage through the California FAIR Plan, while the State Farm DIC policy covers all other major risks, including:
- Water damage
- Theft and vandalism
- Personal liability
- Wind and storm damage
Together, these two policies form a functional substitute for a traditional homeowners policy — though usually at a higher combined cost.
What a DIC Policy Is and Why It’s Being Used More
DIC policies have long existed as a tool for high-risk properties that cannot qualify for standard insurance.
“When a major insurer won’t write full coverage in a wildfire zone, homeowners combine a FAIR Plan fire policy with a DIC policy,” Susman explained. “State Farm has always offered a DIC policy as a companion to the FAIR Plan.”
What’s changed is how widespread this structure has become. What was once mostly limited to rural or repeatedly burned communities now includes suburban neighborhoods and areas far from active fire zones.
Why State Farm’s Move Matters
State Farm’s decision to offer DIC policies to non-renewed customers is significant in both symbolic and practical ways.
Symbolically, it signals that major insurers are not completely abandoning California. Instead, they are testing limited re-engagement while containing wildfire exposure.
Practically, it gives homeowners access to a financially stable national carrier rather than forcing them into unfamiliar or lightly capitalized insurers.
“Many homeowners have been turning to lesser-known companies like Bamboo Insurance,” Gotfredson noted.
Susman added that pricing comparisons also matter.
“Dollar for dollar, a DIC policy with State Farm is usually going to be less expensive than one from a lesser-known carrier,” he said.
The Cost and Complexity Tradeoff for Homeowners
The primary drawback of the FAIR Plan plus DIC structure is cost and administrative complexity.
Pairing two separate policies almost always costs more than a single comprehensive policy under normal market conditions.
“Rates are going to be higher in California than they were five years ago,” Gotfredson reported.
Susman attributed this to the lack of competition.
“Where we are right now is the antithesis of competition,” he said. “And that’s why pricing is higher than it needs to be.”
Homeowners must also manage two insurers, two billing systems, and two sets of coverage terms.
Why Major Insurers Pulled Back in the First Place
State Farm’s earlier retreat, along with similar decisions by Allstate, Farmers, and others, was not sudden or isolated. It followed years of mounting financial pressure.
Wildfire losses have surged, with more than $30 billion in insured losses since 2017.
Reinsurance — the insurance insurers buy to protect themselves — has more than doubled in cost since 2020, dramatically increasing operating expenses.
Regulatory delays under Proposition 103 have restricted insurers’ ability to adjust rates in real time to reflect rising risk and costs.
“It’s not that companies don’t want to insure here,” Susman has said previously. “It’s that they can’t do it sustainably under the current system.”
Regulatory Reforms That Could Change the Market
Stabilization may finally be on the horizon. Governor Gavin Newsom and Insurance Commissioner Ricardo Lara are advancing the Sustainable Insurance Strategy to modernize California’s insurance framework.
Key elements include:
- Allowing forward-looking wildfire catastrophe models
- Letting insurers factor reinsurance costs into rates
- Incentivizing home-hardening and mitigation
- Streamlining the rate approval process under Proposition 103
“When these reforms go into effect by the end of the year,” Susman said, “insurance companies will start to come back to California.”
He added that competition alone could moderate pricing.
“When we do have a free market again and hundreds of companies writing,” he said, “just by competition, we’ll see rates go down.”
What This Means for State Farm Customers Today
For homeowners affected by State Farm’s non-renewals, the new DIC option creates a potential bridge back to stability.
Eligible customers may:
- Qualify for a State Farm DIC policy after securing FAIR Plan fire coverage
- Maintain a relationship with State Farm
- Pay higher premiums than before, but potentially less than with surplus or specialty carriers
- Preserve comprehensive coverage using a two-policy setup
“If they’re purchasing a DIC policy with State Farm today,” Susman said, “the likelihood is better than not that before that policy renews next year, State Farm will be writing full homeowners policies again.”
What Homeowners Should Do Right Now
Homeowners navigating this transition should take proactive steps:
- Contact your agent immediately to confirm DIC and FAIR Plan eligibility
- Compare options through an independent broker
- Document fire-mitigation upgrades and defensible space
- Track regulatory reform timelines
- Avoid coverage gaps, especially if you carry a mortgage
Even short lapses in coverage can create serious financial risk.
A Market Showing Its First Signs of Movement
For years, California’s insurance market has moved in only one direction: retreat. Fewer insurers, higher prices, and shrinking options defined the landscape.
State Farm’s return with companion DIC policies does not solve the crisis — but it represents a measurable shift.
“This is not the solution,” Susman cautioned. “But it’s progress.”
If regulatory reforms take effect as planned, California homeowners may begin to see full carrier returns and stronger competition as early as next year.
For now, coverage options are slowly expanding again.
And for Californians who’ve been living on the insurance edge, even cautious progress is meaningful progress.
