California Wildfires & Insurance: Are You Covered or Scammed?

Published Date: 02/14/2025

California Wildfires & Insurance: Protecting Yourself from Scams, Gaps, and Rising Costs

Each year, California faces devastating wildfires that leave behind not only physical destruction but also financial and emotional turmoil. As families pick up the pieces, many turn to their insurance policies for relief—only to discover gaps in coverage, delays in claims, or worse, scams designed to prey on their desperation.

In a recent Insurance Hour broadcast, insurance expert Karl Susman walked listeners through the essentials of navigating the insurance landscape during and after wildfire disasters. His message was clear: protecting yourself financially after a wildfire requires equal parts knowledge, vigilance, and proactive communication with your insurer.

This article breaks down his major takeaways—covering consumer protections, fraud warnings, rebuilding logistics, and the broader crisis affecting California’s insurance market.

1. Your Rights: Consumer Protections After a Wildfire

When a wildfire hits, homeowners often worry about losing their insurance coverage right when they need it most. Thankfully, California law provides specific safeguards through the Department of Insurance (CDI).

If your home is in a wildfire-affected area, your insurance company cannot non-renew your policy for 12 months. If your home was completely destroyed—a total loss—that protection extends to 24 months.

Even if your property wasn’t directly damaged but lies adjacent to a burn area, you still receive one year of non-renewal protection.

Homeowners can confirm eligibility using a search tool at insurance.ca.gov. By entering your address, the system indicates whether your home qualifies under the wildfire protection order and for how long.

However, as Susman cautions, “These protections don’t automatically activate in your file—you need to take the initiative.” If you receive a non-renewal notice despite being in a protected area, contact your agent, broker, or carrier immediately and reference your status under the CDI protection order.

This proactive communication can prevent an unnecessary policy lapse and ensure continuous coverage during your recovery.

2. Scams and Fraud: The Other Firestorm

Natural disasters unfortunately attract opportunists. Susman emphasized that “scammers are coming out of the woodwork” following major wildfires—and their tactics are becoming increasingly sophisticated.

a. Contractor Scams

One common scheme involves fake or unlicensed contractors who claim they can “move you up the rebuild list” for a large deposit. In reality, legitimate contractors don’t operate this way.

If someone pressures you to sign an open-ended contract or pay a deposit before any work begins, walk away immediately. Always verify a contractor’s license through the California State License Board (CSLB) and consult with an attorney or trusted advisor before signing.

b. Government Aid Fraud

Be wary of anyone claiming to represent FEMA or the Small Business Administration (SBA) via phone or text message. The federal government does not cold-call disaster victims.

Legitimate aid applications begin at disasterassistance.gov — the only official website for federal disaster relief.

FEMA grants can offer up to $40,000–$100,000 for losses, while SBA disaster loans can provide up to $2 million for rebuilding, often with long repayment terms and low interest rates (around 4%). Remember: loans must be repaid, but grants do not.

c. Identity Theft

Fraudsters also impersonate insurance “claim helpers,” requesting sensitive personal details like Social Security numbers or birthdates. Once obtained, they open credit accounts or reroute benefits.

To protect yourself:

• Freeze your credit with all major bureaus (Experian, TransUnion, Equifax).
• Never share personal information unless you initiated the contact.
• Use secure communication channels for all insurance correspondence.

d. Crowdfunding Fraud

Scammers create fake “wildfire relief” websites that mimic legitimate charities or community funds. Before donating, verify organizations through Charity Navigator or official .gov and .org sources.

As Susman puts it bluntly:

“It takes two minutes to set up a website and steal someone’s goodwill. Always verify before you give.”

3. Financial and Property Recovery Steps

Recovering from a wildfire involves more than filing a claim—it’s about rebuilding strategically and minimizing financial loss along the way.

a. Request a Property Tax Adjustment

Homeowners can apply for property tax reassessment or exemption through their county assessor’s office (for Los Angeles County, visit assessor.lacounty.gov).

If your home has been destroyed, your property taxes can be significantly reduced or temporarily eliminated until rebuilding is complete.

b. Establish a Stable Mailing Address

Mail disruptions can delay important communications, especially insurance documents or FEMA correspondence. Susman advises securing a P.O. Box instead of using temporary lodging addresses.

“Rebuilding can take two or more years. You need a stable address now—not three change-of-address forms later.”

c. Put Policies on Auto-Pay

The last thing you want is for your insurance to lapse due to a missed bill during relocation. Set up auto-pay or direct debit to ensure uninterrupted coverage.

4. Managing Insurance During Rebuilding

A critical and often misunderstood step in the recovery process is maintaining proper insurance during reconstruction.

Even if your home is gone, do not cancel your homeowners policy immediately. Many insurers allow policyholders to reduce coverage limits temporarily—sometimes to as little as 10%–20% of the original insured value—to save money while keeping the contract active.

This continuity can make it easier to:

• Transition coverage to a course-of-construction policy, or
• Secure temporary renter’s insurance if you’re staying elsewhere.

Some companies extend liability and personal property coverage from your homeowner’s policy to your temporary residence, but others require a new renter’s policy to satisfy lease requirements.

Always consult your insurance agent or broker before making changes. As Susman emphasizes:

“Don’t assume your contractor’s insurance protects you. Their policy covers them—not you.”

Once rebuilding begins, update your policy to reflect new construction coverage. The rebuilding phase carries its own risks—accidents, theft, or new natural disasters—so ensure your policy is appropriately structured before construction starts.

5. The Bigger Picture: California’s Insurance Market at a Crossroads

The challenges facing wildfire victims are magnified by a statewide insurance crisis. For decades, California’s regulatory framework—particularly Proposition 103—has limited how and when insurers can adjust rates.

While the intent was to protect consumers, it has created friction between insurers and regulators. As disasters multiply, carriers struggle to stay solvent under outdated pricing models.

Susman explains it in simple terms:

“If you’re paying $1,000 for claims but only collecting $950 in premiums, you can’t last long. That’s not greed—it’s math.”

Major carriers such as State Farm have filed emergency rate increase requests, arguing that without approval, they may be unable to meet future claim obligations. These requests mark a tipping point in the state’s insurance ecosystem: if rates can’t adapt to climate-driven risk, availability will continue to shrink, leaving homeowners reliant on the FAIR Plan—the insurer of last resort.

6. Lessons for Homeowners

Susman’s guidance underscores a central truth: in today’s volatile environment, being insured isn’t enough—you must be informed.

Key takeaways include:

• Know your rights: Check if you’re protected from non-renewal.
• Stay vigilant: Scammers exploit chaos—verify everything.
• Maintain coverage continuity: Adjust, don’t cancel, your policy.
• Communicate proactively: Contact your insurer about relocation or rebuilds.
• Anticipate rising costs: Prepare for premium increases driven by market forces.

The insurance landscape is evolving rapidly, and California homeowners are on the front lines. As wildfires intensify, regulatory reforms and consumer education will be crucial in stabilizing coverage availability and affordability.

Conclusion

Wildfires are an unavoidable part of California life—but being blindsided by insurance gaps or fraud doesn’t have to be. As Karl Susman emphasizes, knowledge is power. Understanding your protections, recognizing scams, and proactively managing your policies can make the difference between recovery and ruin.

The future of insurance in California will depend not only on legislative reform and insurer solvency but also on how well consumers prepare, adapt, and advocate for themselves in an increasingly high-risk world.