CBS News Los Angeles - Homeowners insurance crisis panel

Published Date: 06/06/2025

California’s Homeowners Insurance Crisis: What Experts Say You Need to Know

California’s insurance crisis has officially reached the living rooms of everyday homeowners. With coverage costs climbing, non-renewals spreading, and confusion growing, consumers are now asking the same urgent question: What do I really need in my homeowners policy — and how can I make sure I’m protected without overpaying?

In a recent CBS News Los Angeles panel hosted by consumer reporter Christine Lazar, a team of leading insurance experts — Karl Susman, Amy Bach, and Janet Ruiz — tackled those questions head-on. The discussion revealed not just why coverage is becoming more expensive, but also how everyday Californians can take smarter, more proactive steps to protect their homes and finances.

1. The Crisis Isn’t Just About Wildfires — It’s About Coverage Gaps

The panel opened with a powerful reality check: any home can burn.

“Fire insurance is definitely one you want to be sure you have,” Susman explained. “No matter where you are in California. We talk to people who say, ‘I’m not in the hills, there’s no fire.’ The house can burn. Believe me.”

While wildfires dominate the headlines, Susman emphasized that everyday structure fires remain the number-one cause of loss in California. Fire coverage, he said, should never be optional — even for urban homeowners who think they’re “safe.”

But fire isn’t the only peril to worry about. Depending on location, flood coverage may also be necessary — and this is where many Californians are caught off guard.

“Homeowners’ policies can cover water damage,” Susman said, “but they will not cover flood damage. That’s a totally different policy, available through FEMA or an independent company.”

This distinction — between water damage from inside the home and flooding from outside — is one of the most misunderstood aspects of property insurance, and it’s costing Californians millions in uncovered losses each year.

2. The Hidden Cost of “Simplifying” Your Policy

As costs rise, some homeowners are responding by trimming coverage — often in the wrong places.

Susman warned that reducing or eliminating key coverage areas can leave people dangerously underinsured.

“If you’re trying to save money, you can lower things like ‘other structures’ — that covers detached buildings like garages or pools — or reduce personal property coverage if you know you don’t have as much to insure. But don’t touch your core coverage. That’s what protects your home itself.”

This approach, he says, helps balance affordability without jeopardizing essential protection. But too often, consumers make cuts without understanding what they’re giving up.

3. Building a Relationship with Your Insurer — Not Just a Policy

Janet Ruiz, with the Insurance Information Institute, urged Californians to stop treating insurance as a “set it and forget it” purchase.

“Most people buy a policy, stash it away, and never look at it again,” Ruiz said. “But now, we’re all seeing that we need to be more involved. Take time to get to know your company and your agent. Ask questions. Keep notes.”

She emphasized that the claims process, especially after a catastrophe, can involve multiple adjusters and complex documentation. Staying organized — and maintaining communication — is crucial.

“Take notes when you talk to adjusters. Read them back. Ask, ‘Are you putting this in your system?’ If something doesn’t sound right, ask for a supervisor. Advocate for yourself.”

Her message: don’t go into the claims process ready for battle — go in informed and assertive.

4. Why Working with a Broker Still Matters

At one point, Lazar posed a question many viewers have wondered: Is it better to work directly with an insurance company or through a broker?

Susman didn’t hesitate:

“It really is the best way to go because, at the end of the day, you want to have choices. My job is to find the best product for my client. We don’t have to force a square peg into a round hole.”

Independent brokers have access to multiple insurance companies — meaning they can compare coverage and pricing across the marketplace. But as Susman noted, that marketplace is shrinking.

“Right now, we don’t have as many markets available. Instead of shopping, we’re hunting. If we can grab something, we grab it.”

That scarcity has forced many Californians into the California FAIR Plan, the state’s insurer of last resort.

While the FAIR Plan provides essential fire coverage, it doesn’t include liability, theft, or water damage. Homeowners must buy separate “wraparound” policies to fill those gaps — an expensive and complicated process.

“The FAIR Plan’s $3 million limit sounds high,” Lazar pointed out, “but with Southern California’s home values and rebuilding costs, it often isn’t enough.”

5. The Underinsurance Crisis: More Than Half of Californians at Risk

One of the most alarming revelations came from Amy Bach, Executive Director of United Policyholders.

According to her organization’s research, over half of California wildfire victims are underinsured — meaning their policies don’t cover the full cost to rebuild.

“We call it a crisis of underinsurance,” Bach said. “People sock away their policy, figure it’s fine, and only discover after a disaster that it isn’t enough.”

Susman explained how this problem developed:

“Every day, consumers ask how they can lower premiums. The conversation becomes about reducing coverage instead of understanding risk. Over time, that’s created a race to the bottom.”

Janet Ruiz offered a practical test:

“Check your home’s square footage and compare it to the average rebuilding cost per square foot in your area. Talk to a local builder or contractors’ association. That’ll give you a quick sense of whether your coverage is close to reality.”

But Amy Bach countered that insurers themselves share responsibility.

“Consumers should be able to rely on their insurers and sales reps to calculate that accurately,” she said. “They use software like 360Value to estimate rebuilding costs — but they know it’s not working right. Across the country, about two-thirds of homes are underinsured, and insurers know this.”

She added that current laws protect insurers even when these models underestimate true rebuilding costs.

“They keep using the same software because there’s no accountability. That’s why this problem persists.”

6. Why California’s Market Is So Fragile

Beneath all these challenges lies a deeper structural problem: California’s insurance regulatory system hasn’t kept up with the modern realities of risk.

Under Proposition 103, insurers must get state approval before raising rates — a process designed to protect consumers but one that can take months or even years.

In the meantime, inflation, reinsurance costs, and catastrophic losses continue to rise. As a result, insurers say they’re forced to limit new business or withdraw from the market entirely.

The result is a vicious cycle:

• Fewer insurers means less competition.
• Less competition means higher prices and stricter underwriting.
• More consumers are pushed to the FAIR Plan, which strains the system further.

As Susman put it in earlier interviews, California is now “hunting” for coverage — a market dynamic that hurts both consumers and brokers.

7. Practical Steps for Homeowners

Despite the systemic challenges, homeowners can take meaningful action to strengthen their coverage and reduce risk. The experts shared several key takeaways:

✅ 1. Review Your Policy Every Year

Don’t wait for your renewal notice. Review your coverage with an agent or broker annually — especially your dwelling limit, which should reflect current rebuilding costs.

✅ 2. Avoid the Temptation to Cut Key Coverages

Reducing personal property or “other structures” coverage can save a little, but never sacrifice your core dwelling coverage or fire protection.

✅ 3. Keep Good Records

Maintain notes of every conversation with your insurer or adjuster. In a claims situation, this documentation is your best defense.

✅ 4. Compare Carriers, but Be Realistic

Use independent brokers who can access multiple markets. But understand that many companies aren’t writing new policies — so be patient and flexible.

✅ 5. Check Rebuild Costs Locally

Ask local contractors what they’re charging per square foot. Multiply by your home’s size — that’s your minimum coverage benchmark.

8. The Bigger Picture: Accountability and Adaptation

California’s homeowners insurance crisis is as much about regulatory inertia as it is about climate risk.

The system needs modernization — more flexibility for insurers to price risk accurately, and more accountability to ensure consumers are fully protected.

As Amy Bach put it, “We can educate homeowners all day long, but they should be able to rely on their insurers to get this right.”

Until that happens, homeowners must be their own advocates — reviewing policies, asking tough questions, and working with professionals who understand the rapidly changing landscape.

Final Thoughts

The CBS panel underscored one truth above all: in California’s volatile insurance environment, knowledge is the best protection.

Fire, flood, inflation, and bureaucracy may be beyond any one person’s control, but understanding your coverage — and updating it regularly — is something every homeowner can do.

“Insurance isn’t just a policy,” Susman said. “It’s your financial safety net. But you’ve got to make sure the net still fits.”