If you own property in California, you've probably noticed something unsettling: insurance companies are leaving the state in droves, premiums are skyrocketing, and getting coverage in fire-prone areas feels nearly impossible. You're not imagining it. California's insurance market is going through the most dramatic transformation in decades, and 2026 brings both new protections and ongoing challenges that every homeowner needs to understand.
The wildfire crisis has fundamentally reshaped how insurance works in the Golden State. With half a million Californians now relying on the FAIR Plan—the state's insurer of last resort—and premiums jumping 21% in 2025 alone, understanding your options has never been more critical. Here's what you need to know about California insurance as we move into 2026.
The Wildfire Moratorium: Your Shield Against Non-Renewals
California's mandatory 12-month moratorium on insurance non-renewals is your strongest protection if you live in or near a wildfire perimeter. When the Governor declares a state of emergency for a wildfire, insurance companies cannot cancel or refuse to renew your residential property insurance for one full year. This protection applies whether your home was damaged or not—as long as you're within the fire perimeter or an adjoining ZIP code.
Starting January 1, 2026, the moratorium got even stronger. Thanks to the Business Insurance Protection Act (SB 547), this protection now extends beyond residential properties to include commercial buildings, homeowners' associations, condominiums, affordable housing units, and non-profits. If you manage an HOA or own a small business in a fire zone, you're now protected from sudden non-renewals during the critical recovery period.
The Great California Insurance Exodus
Here's the uncomfortable truth: seven of California's twelve largest insurers have reduced coverage over the past two years. State Farm, once the biggest player in the state, stopped issuing new policies entirely and later dropped coverage for 72,000 homes. Farmers Insurance and other major carriers raised rates by 15-20% in 2024, while simultaneously pulling back from high-risk areas.
Why the exodus? Insurance companies point to mounting wildfire losses, outdated regulations that don't allow them to charge risk-based rates quickly enough, and reinsurance costs that have gone through the roof. From their perspective, California's regulatory framework—particularly Proposition 103—makes it nearly impossible to price policies accurately in an era of escalating climate risk.
The result? A massive surge in the California FAIR Plan, the state-run insurer of last resort. Since 2018, FAIR Plan policies have jumped 276%, reaching over 573,000 policies by March 2025. That's nearly quadruple the number from 2015. Total dwelling coverage exposure hit $458 billion—a staggering 61% increase from just September 2023. Premiums collected by the FAIR Plan soared to $1.4 billion in 2024, more than 15 times higher than the $87.2 million collected in 2018.
If you're one of the half-million Californians now relying on the FAIR Plan, understand what you're getting: bare-bones fire coverage only, typically with higher deductibles and coverage limits that may not fully protect your home. You'll likely need to buy a separate policy for everything else—theft, liability, water damage. It's not ideal, but for many homeowners in wildfire zones, it's the only option available.
How Proposition 103 Shapes Your Rates
California is different from almost every other state when it comes to insurance regulation, and Proposition 103 is why. Passed by voters in 1988, Prop 103 gives the Insurance Commissioner significant power to approve or reject rate increases and strictly limits what factors insurers can use to set your premiums.
For auto insurance, Prop 103 requires insurers to prioritize three specific factors in order: your driving safety record, annual miles driven, and years of driving experience. Other factors can be considered only if they have a substantial relationship to risk of loss. Critically, California is one of only four states—along with Massachusetts, Hawaii, and Michigan—that prohibits the use of credit-based insurance scores. The Department of Insurance has never adopted regulations acknowledging credit history as a valid rating factor.
This is a double-edged sword. If you have excellent credit but a couple of speeding tickets, you'll likely pay less in California than in other states. But if you're a safe driver with poor credit, you won't be penalized the way you would elsewhere. The Federal Trade Commission found that credit-based insurance scores are predictive of claims, but California's law prioritizes consumer protection and fairness over actuarial precision.
For homeowners insurance, Prop 103's requirement that insurers justify rate increases through a public process means changes happen slowly. When wildfire risk and reinsurance costs spike suddenly, insurers can't adjust rates fast enough to keep pace—which is one reason many have chosen to leave the market entirely rather than navigate the regulatory maze.
What You'll Pay: California Insurance Costs in 2026
Let's talk numbers. The median annual home insurance premium among California mortgage-payers hit $1,700 in 2024—28% higher than in 2014, even after adjusting for inflation. But that statewide average masks huge regional variations. In Mariposa County, the median premium reached about $3,700. Depending on your location and fire risk, you might pay anywhere from under $1,000 to more than $10,000 annually.
California homeowners paid an average of $2,424 in 2024, but researchers project that figure will jump 21% throughout 2025 to reach approximately $2,930. That increase is nearly three times the nationwide average increase of 8%. If you live in a high-fire-risk area, expect your costs to be on the higher end—or to find yourself pushed into the FAIR Plan with its limited coverage.
Some counties have seen premium increases exceeding 150% over the past few years as insurers reassess wildfire exposure. The Los Angeles fires in early 2025 are projected to cost insurers $8 billion, which will almost certainly drive further rate increases and market exits as we move deeper into 2026.
Your Next Steps: Protecting Your Property in 2026
Don't wait for a non-renewal notice to start planning. First, assess your current coverage honestly. Do you have enough dwelling coverage to rebuild at today's construction costs? Are your personal belongings adequately covered? If you're in a wildfire zone, have you taken advantage of defensible space requirements and home hardening programs that might qualify you for better rates or prevent non-renewal?
Shop around every year, even if your rates haven't increased dramatically. The California insurance market is fragmented, with smaller regional carriers and surplus lines insurers sometimes offering coverage where the big players won't. Consider working with an independent agent who knows which carriers are still writing in your area.
If you end up in the FAIR Plan, don't assume it's permanent. Keep monitoring the market and make property improvements that reduce your fire risk. New wildfire disclosure laws that took effect January 1, 2025, require insurers to provide clearer information about coverage limits and reasons for non-renewal, which should make it easier to understand what changes might make you insurable again.
Finally, document everything about your property and possessions now, before you need to file a claim. Take photos, keep receipts, and store digital copies somewhere off-site. In a state where wildfire risk isn't going away, being prepared isn't pessimistic—it's practical.
