The growing home insurance crisis in California is becoming increasingly alarming as residents begin to recover from the destructive Eaton and Palisades wildfires.
A stark contrast is evident for Altadena neighbors Louise Hamlin and Chris Wilson, highlighting the disparities in insurance coverage and the subsequent recovery process. Hamlin, who possessed a private insurance policy, has already received nearly a million dollars and is actively seeking contractors to rebuild her home. In contrast, Wilson faces a daunting situation with limited financial support due to his reliance on the California Fair Access to Insurance Requirements Plan (FAIR Plan), the state’s minimal insurance option. He is now exploring loans, legal action, and even relocating his family out of the state.
The FAIR Plan serves as a safety net for homeowners unable to secure private insurance, a rising necessity as numerous major insurers have paused or limited new policies in California in recent years. Wilson’s private insurer did not renew his policy last year, despite his proposals for fire mitigation measures. With no other options available, he was forced to enroll in the FAIR Plan to meet mortgage requirements.
The demand for FAIR residential policies has surged, more than doubling from 2020 to 2024, with nearly 452,000 policies now active in the state. Under this plan, Wilson’s premiums were about 60% higher than Hamlin’s, yet he is set to receive less than half the coverage. Moreover, he incurred additional costs for “wrap-around insurance” to cover risks not included in the FAIR Plan, such as burst pipes.
According to the Insurance Information Institute, the FAIR Plan serves as a crucial lifeline for homeowners devoid of private insurance options, although the outcomes would be significantly worse without any coverage.
In response, state officials have implemented new regulations, granting insurers more flexibility to increase premiums in exchange for issuing additional policies in high-risk regions. This includes allowing considerations for climate change when determining rates and permitting insurers to pass reinsurance costs onto California consumers.
Experts emphasize the necessity for government intervention in funding essential mitigation efforts to ensure that fire risk burdens do not disproportionately fall on homeowners. California plans to allocate approximately $25 million from a voter-approved climate bond to enhance fire mitigation measures surrounding residences.
