Jan 16, 2025
California’s relentless wildfires have sparked not only destruction but a growing insurance crisis, leaving thousands of residents without coverage as the flames consume homes and lives.
As of January 15, wildfires have burned more than 40,000 acres, impacted more than 12,000 structures and resulted in at least 24 deaths.
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As firefighters work to contain the blazes, many residents face the added blow of losing homeowners insurance, which should cover fire-related damage or destruction.
Several insurance companies have stopped offering policies in California or are refusing to renew existing ones in an effort to reduce their financial risk, according to Fox 9 News. However, Governor Gavin Newsom has a strong message for these insurers: Not on my watch.
"California is preventing insurance companies from canceling home coverage for LA wildfire victims in impacted zip codes over the next year,” Newsom shared on X, formerly Twitter. “The folks in these communities have suffered enough. They should not have to deal with the stress of home insurance on top of it all."
What does this mean for Californians?
Last week, California's Insurance Commissioner Ricardo Lara issued a one-year moratorium preventing insurance companies from canceling or issuing nonrenewals for homeowners in the neighborhoods or adjoining ZIP codes affected by the Palisades and Eaton fires. This ban applies regardless of whether the homeowners suffered a loss.
The order applies to all residential property policies as of January 7, when Governor Newsom declared a state of emergency.
In addition, Lara also issued a notice urging insurance companies to halt any pending nonrenewals for properties near wildfires, even if they’re not covered by the moratorium. This notice also applies to homeowners who received non-renewal notices between October 9, 2024 and January 7.
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“My heart goes out to my fellow Angelenos. Our top priority is protecting Californians during this crisis and helping us recover,” Lara said in a California Department of Insurance statement. “I am working on all fronts to make sure wildfire victims get the benefits they are entitled to, and they get it as soon as possible.”
As a result of these measures, thousands of Californians will retain homeowners insurance for the next year. While Lara’s request to pause certain nonrenewals is not legally binding, the ban on nonrenewals after January 7 is enforceable.
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Why are insurers leaving California?
Between 2020 and 2022, insurance companies declined to renew more than 2.8 million homeowners policies in California, according to CNN.
In recent years, many insurers have scaled back operations or exited the state entirely. These include Allstate, American National, AmGUARD, Nationwide, State Farm, Travelers and Safeco.
NBC’s Bay Area Responds team spoke with Maria Espada, an East Oakland resident insured by Safeco insurance for 12 years. She recently learned that Safeco is dropping her policy.
“Why [did they] they choose me? Because I’m a good customer, I pay regularly my policy,” Espada told reporters.
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State records show Safeco dropped 75 customers in Espada’s zip code and 955 customers across the Bay Area. While Safeco declined to comment on Espada’s case, the company cited the Bay Area’s “significant earthquake risk and the resulting home fires” as a factor in its decisions.
The rising threat of wildfires, earthquakes and other natural disasters have led many insurance companies to withdraw coverage in large parts of California. This has created a crisis for homeowners statewide, forcing many to go without insurance. According to LendingTree, more than 10% of all California homeowners lack homeowners insurance.
“The high wildfire risk in California has led to insurance companies withdrawing from underwriting policies in some parts of the state or limiting coverage for perils like wildfire, making it even harder for homeowners to find affordable policies,” said Divya Sangameshwar, a LendingTree home insurance analyst.
In response, California has taken steps to address these challenges, including passing the Net Cost of Reinsurance in Ratemaking Regulation, which requires insurers to increase coverage in high-risk areas. However, critics argue that these rules may raise costs for homeowners.
For those struggling to find homeowners' insurance, the California FAIR Plan provides basic fire insurance when private insurers will not.
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Danielle is a personal finance writer based in Ohio. Her work has appeared in numerous publications including Motley Fool and Business Insider. She believes financial literacy key to helping people build a life they love.
