California Home Insurance Coverage Crisis

Published Date: 01/17/2024

Buying a home in California has always been difficult—but keeping it insured has become a whole new challenge.

In recent years, thousands of homeowners across the state have opened their renewal notices only to find devastating news: their insurer is pulling out, non-renewing, or refusing to write new business in their ZIP code.

A recent investigative report from NBC Los Angeles, featuring insurance expert Karl Susman and consumer advocate Amy Bach from United Policyholders, highlights the growing crisis and the limited options many Californians now face.

This is not a temporary disruption. It represents a structural shift in California’s property insurance market, forcing regulators, insurers, and consumers to rethink how coverage works in a high-risk environment.

Non-Renewals and the Growing Coverage Crisis

For homeowners like Allison Rosenberg of Marina del Rey, the challenge is no longer just rising premiums—it’s finding any insurer willing to provide coverage at all.

After more than a decade with the same insurance company, Rosenberg received a non-renewal notice. The reason: she had filed three claims over ten years—hardly excessive by traditional standards, but enough to label her “high risk” in today’s market.

“I hit the wall pretty quickly,” Rosenberg told NBC. “With no takers, I had to turn to the California FAIR Plan.”

Her situation is becoming increasingly common. Insurers across the state have sharply reduced their exposure, especially in wildfire-prone and coastal regions. As a result, many homeowners who once had multiple options now find themselves with only one: the California FAIR Plan.

The California FAIR Plan: From Last Resort to First Choice

The California FAIR Plan was created decades ago to provide basic fire insurance to homeowners who could not obtain coverage elsewhere. It is funded by all licensed insurers in the state and functions as a shared safety net.

Today, that safety net is stretched thin.

Between 2018 and 2022, FAIR Plan policies more than doubled. By late 2023, policies exceeded 341,000 statewide. NBC’s I-Team found that about 40% of those homeowners rely on the FAIR Plan as their only insurance coverage.

That reliance creates serious coverage gaps. As Amy Bach explains, “The FAIR Plan only covers fire. If your toilet overflows, if someone breaks in, if your washing machine hose bursts—you get nothing.”

Without supplemental “Difference in Conditions” (DIC) or wraparound policies, homeowners remain exposed to theft, liability, and water damage—some of the most common and expensive household losses.

Court Rulings and the Push to Expand FAIR Plan Coverage

In late 2023, a California court upheld an order from the state’s Insurance Commissioner requiring the FAIR Plan to expand its coverage beyond fire-only policies.

In theory, this would eventually allow the FAIR Plan to offer more comprehensive homeowners policies that include theft, liability, and water damage—similar to private-market coverage.

However, Karl Susman warns that change will be slow. Even if the ruling were implemented immediately, it could take years before expanded policies become available.

The challenge is that the FAIR Plan has never priced or managed these broader risks. It lacks historical data for theft, liability, and personal injury claims, making pricing and underwriting complex. The FAIR Plan has stated it will carefully review the ruling and assess its long-term impact before moving forward.

Fire Safety Discounts and Home Hardening Incentives

In the short term, the FAIR Plan is offering limited relief through “home hardening” discounts for homeowners who reduce fire risk.

There are two main categories:

• Structural improvements, such as sealing eaves, installing ember-resistant vents, and adding chimney spark arrestors
• Vegetation management, including clearing brush and flammable materials around the home

Combined, these improvements can result in premium discounts of up to 14.5%. While modest, these incentives encourage prevention and support a broader move toward risk-based pricing.

How Technology Is Reshaping Risk and Premiums

For the first time, insurers—including the FAIR Plan—are using advanced data modeling to assess wildfire risk with greater precision.

This means two homes on the same street can now have very different premiums based on factors such as vegetation, distance to fire services, construction materials, and surrounding terrain.

While this granular pricing raises affordability concerns, experts argue it reflects a necessary modernization of the insurance system. According to Susman, technology allows insurers to price risk more accurately rather than relying solely on broad ZIP-code-based assumptions.

The FAIR Plan Application Backlog and Timing Risks

As more homeowners are forced into the FAIR Plan, application volume has surged. Processing delays are now common.

According to Susman, it can take one to two weeks just to bind a FAIR Plan policy due to the overwhelming number of applications. These delays can create serious problems during home purchases or policy renewals.

Without active insurance coverage, mortgage lenders may freeze funding, delay closings, or impose costly force-placed insurance. For this reason, experts strongly advise starting the insurance search at least 60 to 90 days before a renewal or closing date.

Expert Strategies to Manage Cost and Insurability

To navigate today’s turbulent insurance market, experts recommend several practical strategies:

Prioritize essential coverage. If premiums are becoming unaffordable, reduce nonessential coverages such as personal contents—but never reduce dwelling coverage, which protects the structure of your home.

Raise your deductible. A higher deductible can significantly lower premiums, though it means greater out-of-pocket costs after a loss.

Work with an experienced insurance broker. FAIR Plan policies cost the same whether purchased directly or through a broker, and brokers cannot charge extra fees. A knowledgeable broker can also help identify discounts, supplemental coverage, and potential gaps.

Avoid small claims when possible. Frequent low-dollar claims can harm your underwriting profile and limit future options. Handling minor repairs out of pocket can protect long-term insurability.

Maintain continuous coverage. If you currently have private-market insurance, do everything possible to keep it in force. A lapse in coverage can make it extremely difficult to secure an affordable replacement.

Regulatory Efforts and the Long Road to Market Stability

Governor Gavin Newsom and Insurance Commissioner Ricardo Lara have acknowledged the severity of California’s insurance crisis. In late 2023, new regulatory guidelines were introduced to encourage insurers to resume writing policies in the state.

While these efforts are a step forward, meaningful market recovery will take time. As Susman notes, the state is in a transition period, and structural reforms may take months—or even years—to produce measurable results.

The Bottom Line for California Homeowners

California’s home insurance challenges are far from over. However, progress is underway through court rulings, regulatory reform, improved risk modeling, and fire prevention incentives.

For now, homeowners’ best protection is preparation. Maintain existing coverage whenever possible, explore all available options early, take advantage of safety discounts, and work with knowledgeable professionals.

As one homeowner told NBC, “I’ll take what I can get at this point.”

That sentiment reflects today’s reality. Yet with continued reform, technology, and risk mitigation, California’s insurance market may eventually regain balance—offering homeowners not just coverage, but genuine security.