If you're shopping for home insurance in California right now, you've probably noticed something unsettling: your options are shrinking, your premiums are climbing, and some of the biggest names in insurance are nowhere to be found. You're not imagining it. California is in the middle of a full-blown home insurance crisis, and it's fundamentally changing how homeowners protect their most valuable asset.
The situation has gotten so dire that more than 555,000 California homeowners—a number that jumped 23% just between September 2024 and March 2025—now get their coverage through the California FAIR Plan, the state's insurer of last resort. That's more than double the number from just three years ago. Meanwhile, homeowners who can still find traditional coverage are bracing for premium increases averaging 21% in 2025, pushing the average annual cost to nearly $3,000.
Here's what you need to know about getting and keeping home insurance in California—and how to protect yourself when the traditional insurance market is failing.
Why Major Insurers Are Leaving California
The list of insurance companies that have either stopped writing new policies or significantly reduced their California presence reads like a who's who of the industry. State Farm—California's largest home insurer—stopped accepting new applications in 2023 and discontinued 72,000 existing policies. Allstate stopped writing new California policies back in 2022. Nationwide's subsidiary Crestbrook Insurance stopped writing new policies in December 2023 and plans to stop renewing all existing policies by June 2025.
The Hartford, Travelers, USAA, Tokio Marine, and Farmers Insurance have all implemented restrictions, stopped new policies, or withdrawn from the market entirely. Since 2019, more than 100,000 Californians have been dropped from their insurance carriers. This isn't about one or two companies making business decisions—it's a systemic market failure.
The reason? California's catastrophic wildfires combined with a regulatory environment that limits how much insurers can charge. A law enacted in 1988 requires insurers to obtain approval from the California Department of Insurance before increasing premiums. While this was designed to protect consumers from price gouging, it now prevents insurers from adjusting rates quickly enough to match rapidly escalating wildfire risks. Construction costs have also skyrocketed due to inflation and labor shortages, making it even more expensive for insurers to pay claims. Many companies have decided it's simply not worth the risk to operate in California at rates the state will approve.
What the FAIR Plan Actually Covers (and What It Doesn't)
If you can't find coverage from a traditional insurer, you'll likely end up with the California FAIR Plan. Think of it as the insurance of last resort—it's not great, but it's better than nothing. The FAIR Plan provides basic fire coverage for your home and personal property. The statewide average cost is about $2,800 per year, though prices vary dramatically depending on where you live and your home's value. Some homeowners in high-risk areas pay over $21,000 annually, while others in lower-risk areas might pay as little as a few hundred dollars.
Here's the catch: the FAIR Plan only covers fire damage. It doesn't cover theft, vandalism, water damage, liability claims if someone gets hurt on your property, or any of the other perils included in a standard homeowners policy. That means you'll need to purchase a separate policy—called a Difference in Conditions (DIC) policy—to cover everything else. Finding a DIC policy can be challenging, and between your FAIR Plan coverage and your DIC policy, you're often paying significantly more than you would for a standard all-perils policy.
In some high-risk communities, FAIR Plan penetration has reached shocking levels. In one northern Napa County ZIP code, nearly 60% of homes are insured by the FAIR Plan. The plan now covers 2.5% of the statewide market but a staggering 20.4% of the market in high wildfire-risk areas. If you live in a wildfire-prone area, there's a very real chance this is your only option.
The Earthquake Coverage Gap You Need to Know About
Here's something that catches many California homeowners by surprise: your standard home insurance policy does not cover earthquake damage. Not even a little bit. If the San Andreas fault decides to wake up, your homeowners insurance won't pay a dime to repair the structural damage to your house—though it will cover fire damage caused by the earthquake, which is a small consolation.
California law requires insurance companies to offer you earthquake insurance every other year if you have homeowners coverage, but most homeowners decline it. Why? The cost. Earthquake insurance typically runs between $1,000 and $2,500 annually for $500,000 of coverage, and it comes with hefty deductibles—usually 5% to 25% of your home's replacement value. That means if your home is worth $500,000 and you have a 15% deductible, you'll pay the first $75,000 of damage out of pocket before your insurance kicks in.
You can purchase earthquake coverage through the California Earthquake Authority (CEA), a not-for-profit organization that's one of the largest providers of residential earthquake insurance in the state. You can also buy standalone earthquake policies from private insurers like GeoVera, or sometimes through your current homeowners provider if they partner with the CEA. Every CEA policy includes $10,000 in building code upgrade coverage, which helps pay for bringing your damaged home up to current building codes when you rebuild—an often-overlooked expense that can add significantly to reconstruction costs.
How to Navigate California's Home Insurance Market
Even in this challenging market, you have options. Start by working with an independent insurance agent who represents multiple carriers. They'll know which companies are still writing policies in your area and can shop around on your behalf. Don't just compare prices—pay attention to coverage limits, deductibles, and what's actually covered. A cheaper policy that doesn't adequately protect your home is no bargain.
If you're in a high-risk area and getting dropped or can't find traditional coverage, you may need to embrace a two-policy approach: FAIR Plan coverage for fire, plus a DIC policy for everything else. Yes, it's more expensive and more complicated, but it's better than being underinsured. When shopping for DIC coverage, make sure it includes liability protection—that's often where homeowners face the biggest financial exposure if someone gets injured on their property.
Take steps to make your home more insurable. Clearing brush and maintaining defensible space around your property isn't just smart fire prevention—it can make insurers more willing to cover you and may even reduce your premiums. Installing fire-resistant roofing materials, replacing wood fencing near your house with non-combustible materials, and upgrading to tempered glass windows can all help. Some insurers offer discounts for these improvements, and they could be the difference between getting coverage and being denied.
Consider your earthquake risk seriously. If you live near a major fault line or in an area with significant seismic activity, earthquake insurance isn't a luxury—it's a necessity. Yes, the deductibles are high and the premiums are steep, but can you afford to rebuild your entire house out of pocket if a major earthquake hits? For most homeowners, the answer is no. Even if you decide the cost is prohibitive, make that decision consciously rather than assuming your regular homeowners policy has you covered.
What Comes Next
California's home insurance crisis isn't going away anytime soon. The state is working on regulatory reforms to encourage insurers to return to the market, but these changes take time and may not be enough to reverse the exodus. Climate change continues to worsen wildfire risks, and construction costs remain elevated. If you're a California homeowner, you need to be proactive about your insurance coverage—waiting until you get a non-renewal notice leaves you scrambling for options that may not exist.
The good news is that you're not powerless. Start by reviewing your current coverage and understanding exactly what's protected and what's not. Get quotes from multiple carriers if you can, and seriously evaluate whether earthquake coverage makes sense for your situation. Take steps to reduce your wildfire risk and make your property more attractive to insurers. And if you end up needing the FAIR Plan, make sure you understand its limitations and supplement it with appropriate additional coverage. Your home is likely your largest financial asset—protecting it is worth the extra effort in this challenging market.
