California Home Insurance in 2025: What Homeowners Must Know

Published Date: 07/02/2024

If you’re a California homeowner, you’ve likely noticed your insurance costs rising, your options shrinking, and your patience wearing thin. Between wildfire exposure, regulatory hurdles, and major insurers cutting back, the state’s property insurance landscape is in turmoil.



In this episode of Insurance Hour, host and insurance expert Karl Susman tackled a flood of listener questions — from fire map confusion to misunderstood coverage terms.

Here’s what you need to know about the state of California’s insurance market in 2025 — and what the coming regulatory reforms could mean for you.

Are Insurers Like USAA Pulling Out of California?

One of the most common questions homeowners ask is whether major carriers are leaving the state altogether.

While USAA has not officially withdrawn from California, Susman made it clear that no insurer is operating the way they once did.

“I don’t believe there is a carrier that is not either restricting the business that they’re writing or non-renewing some level of policies,” Susman explained. “They’re all being very particular about conditions — looking at your home, your exposures, and your risk.”

Insurers are using this period of disruption to tighten underwriting standards and “clean their books.” Properties with outdated wiring, older roofing, or locations within wildfire-prone ZIP codes are especially vulnerable to non-renewal.

The encouraging news is that California may be nearing the end of the worst phase of the crisis.

“We should be seeing the new regulations coming out literally any day,” Susman said. “And we should start to see some changes after that.”

Those changes are part of the Sustainable Insurance Strategy, which is designed to modernize how insurers assess risk and file rates.

Who Creates and Challenges Fire Maps in California?

Another major source of confusion is wildfire risk mapping. Homeowners often assume there is a single, official fire map used by all insurers. That is not the case.

“Fire maps are a little bit misunderstood,” Susman said. “There is no specific fire map that everyone goes by — not the Department of Insurance, not the insurance companies.”

Instead, several different systems are in use at the same time:

• The California Department of Insurance creates maps to identify distressed areas with limited access to coverage.
• CAL FIRE maintains Fire Hazard Severity Zone maps for building and land-use regulation.
• Private insurers rely on proprietary risk models built on satellite data, vegetation analysis, and fire history.
• The Sustainable Insurance Strategy is developing new maps tied to mandatory coverage expansion.

“One fire map could be created by one insurance company, another by the Department of Insurance, another by the Sustainable Insurance Strategy,” Susman explained. “So there’s not any one map I can point to and say, ‘This is the map.’”

Because there is no single standard, two homeowners in similar locations can receive dramatically different pricing depending on the insurer and the model being used.

What Ordinance and Law Coverage Really Means

One of the most misunderstood parts of a homeowners policy is ordinance and law coverage, yet it can be one of the most financially important.

This coverage pays for the additional costs of rebuilding your home to current building codes after a loss. Standard replacement cost coverage only rebuilds what you had — not what modern codes now require.

“In general, what insurance does is it’s supposed to rebuild your house from what happened,” Susman said. “But if you’re talking about building code upgrades or things required by the city that weren’t part of your old home, that’s where ordinance and law coverage comes in.”

Examples of expenses this coverage can handle include:

• Seismically upgraded foundations
• Fire-rated roofing and underlayment
• Updated electrical systems
• Solar-ready structural requirements
• Modern plumbing and ventilation standards

“If you have a home built in the 1960s and it burns down today, your policy will rebuild it as it was — unless you have ordinance and law coverage,” Susman explained.

Every homeowner should review their declarations page to confirm this coverage exists and that the limit is adequate.

Why Insurers Are Now Scrutinizing Every Detail

In today’s market, underwriting has become far more aggressive and detailed than in the past.

Insurers are closely evaluating:

• Roof material and age
• Vegetation density and defensible space
• Fire-station access and road conditions
• Proximity to wildland–urban interface zones

“They’re going to be looking at your home,” Susman said. “They’re going to be looking at potential exposures around your home.”

Homes near the wildland–urban interface — where development meets natural vegetation — face the highest level of scrutiny, even if they’ve never been directly threatened by fire.

The Reality of “Book Cleaning”

Susman also addressed an industry practice homeowners are increasingly experiencing: book cleaning.

This is the quiet pruning of insurance portfolios to remove higher-risk or marginal policies.

“They’re taking advantage of the fact that the market is extremely tight,” he said. “So maybe a risk that they didn’t really want to have initially — well, that’s going to be one of the first ones they get off of.”

This is often driven by regulatory lag. When insurers cannot obtain timely rate increases to reflect rising costs and wildfire exposure, some choose to reduce exposure instead of operating at a loss.

For homeowners, this can feel arbitrary — but it is a direct consequence of an imbalanced regulatory environment.

How the Sustainable Insurance Strategy Could Change Everything

Despite current conditions, Susman emphasized that major reform is finally underway.

The Sustainable Insurance Strategy, led by Insurance Commissioner Ricardo Lara, is designed to:

• Allow forward-looking catastrophe models in rate filings
• Require insurers to write more policies in underserved areas
• Standardize transparency in wildfire risk scoring
• Reward defensible space and home hardening

“Once competition returns,” Susman said, “we’ll see better pricing, better service, and more stability. That’s what we’re all waiting for.”

These reforms aim to restore insurer confidence and reintroduce true competition — the only long-term solution to both availability and affordability.

What Homeowners Should Be Doing Right Now

While reforms move through the system, homeowners can take practical steps to protect themselves.

Review your replacement cost and make sure it reflects today’s construction prices. Many homes remain underinsured due to inflation.

Add or increase ordinance and law coverage. The cost is usually small compared to potential rebuilding expenses.

Document all mitigation efforts. Photos of defensible space, Class A roofs, hardened vents, and other upgrades may qualify for future discounts.

Monitor FAIR Plan updates. The FAIR Plan remains a crucial safety net, and reforms may expand its pricing flexibility and discount programs.

Work with an independent agent. Independent brokers can access both admitted and surplus lines carriers, greatly improving your chances of finding coverage.

Final Thoughts

California’s insurance market is in a difficult but temporary transition. Wildfires, regulation, and insurer pullbacks have created extraordinary pressure — but systemic reform is finally taking shape.

As modern risk modeling, mitigation incentives, and mandatory coverage expansion begin to take hold, insurers will regain confidence to write policies in California again. That means more choice, better pricing, and a more resilient market.

For now, knowledge is your strongest defense. Understanding your coverage, your gaps, and the forces shaping the marketplace gives you leverage in uncertain times.

“These are extremely challenging times,” Susman concluded. “But help is coming. And if you understand the system, you can make it work for you.”