If you're trying to buy or keep homeowners insurance in a wildfire-prone area, you've probably run into a wall. Maybe your insurer dropped you. Maybe three companies turned you down. Maybe you're stuck with a FAIR Plan policy that costs twice as much and covers half as much. You're not alone—and you're not imagining things. The wildfire insurance market is in crisis.
Major insurers like State Farm, Allstate, and Farmers have stopped writing new policies or dropped existing customers across California, Colorado, Oregon, and other Western states. In California alone, the FAIR Plan—the insurer of last resort—grew from 200,000 policies four years ago to over 590,000 by June 2025. That's more than double. The problem isn't going away, but understanding what's happening and what you can do about it can help you protect your home and your wallet.
Why Insurers Are Pulling Out
Insurance companies are businesses, and when wildfire losses exceed what they collect in premiums, they stop offering coverage. The math has gotten brutal. More than 2.6 million homes across 14 Western states face moderate or greater wildfire risk, representing $1.3 trillion in potential reconstruction costs. California alone accounts for 1.2 million of those at-risk homes.
Take what happened in Los Angeles: State Farm, the region's biggest insurer with 250,000 homes in LA County, dropped 1,600 policies in the Pacific Palisades in July 2024—just months before devastating fires hit that exact area. They canceled more than 2,000 additional policies in other LA zip codes. This isn't isolated. In Nevada, insurers planned to cancel nearly 5,000 policies due to wildfire risk in 2024 alone.
The financial impact on homeowners is steep. In Colorado, average premiums jumped 58% between 2018 and 2023, reaching $4,072 annually for $300,000 in coverage. Across the country, homeowners insurance premiums increased an average of $648 from 2021 to 2024—a 24% increase that's 11% higher than inflation over that period.
The FAIR Plan Reality
When traditional insurers won't cover you, the FAIR Plan becomes your only option. It's the insurer of last resort—a safety net that's now catching hundreds of thousands of people. But it's expensive and limited. The average FAIR Plan policy costs around $3,200 annually, more than double the cost of standard California homeowners insurance at $1,460.
The coverage is also more restrictive. FAIR Plans typically offer dwelling coverage but limited or no coverage for personal property, liability, or additional living expenses. You often need to purchase a separate "wrap" policy to fill in these gaps, adding even more cost. Between September 2024 and March 2025 alone, FAIR Plan policies grew by 23%—a sign of how quickly the traditional market is shrinking.
More than half of states now offer FAIR plans or similar last-resort options. Colorado passed legislation in 2024 creating a new plan for home and business owners who can't secure adequate coverage. Nevada is studying whether to create its own FAIR Plan. The trend is clear: as climate-driven wildfires intensify, more states are building safety nets for homeowners who can't find coverage elsewhere.
Defensible Space: Your Best Leverage
Here's something you can control: defensible space. California law requires 100 feet of defensible space around every home in wildfire-prone areas, and insurers can legally deny coverage if you don't maintain it. More importantly, creating and maintaining defensible space genuinely reduces your wildfire risk—and insurers are starting to reward it.
Defensible space breaks down into three zones. Zone 0 extends 0-5 feet from your home and focuses on eliminating anything flammable—remove dead plants, store firewood elsewhere, use fire-resistant mulch. Zone 1 extends 30 feet from your home and requires spacing between plants, removing dead vegetation, and keeping trees well-pruned. Zone 2 extends from 30 to 100 feet and involves creating fuel breaks and maintaining healthy vegetation spacing.
Insurers can require more than 100 feet of clearance if a fire expert determines it's necessary to significantly reduce flame or heat transmission risk. This isn't just about compliance—it's about survival. Ember attacks cause most home ignitions during wildfires, and defensible space helps prevent those embers from finding fuel near your home.
California's Safer from Wildfires program offers a roadmap for protecting your property and potentially reducing insurance costs. It focuses on three layers: hardening your structure with fire-resistant materials, maintaining defensible space in your immediate surroundings, and working with your community on wildfire resilience. Some California insurers now offer premium discounts for homes that meet fire-proofing standards, though the savings can be modest—one example showed a $14 annual discount on a $13,800 premium for a high-risk property.
What's Changing (and What It Means for You)
California is fighting back with regulation. Under the state's Sustainable Insurance Strategy, insurers must now increase coverage in wildfire-distressed areas equivalent to at least 85% of their statewide market share. There's currently no legal requirement for insurers to provide any coverage in high-risk areas, so this is a significant shift. Insurers have to increase coverage by 5% every two years until they hit that 85% threshold.
The strategy is already producing results. Allstate and Farmers have announced plans to resume or expand coverage in California when the reforms take full effect. This doesn't mean insurance will be cheap or easy to get, but it should improve availability over the next few years.
The broader economic picture remains concerning. A Senate Budget Committee report warned that climate-driven insurance problems could trigger a systemic economic shock similar to the 2008 financial crisis—or worse. In communities where insurance premiums skyrocket or coverage becomes unavailable, only cash buyers can purchase homes, which devastates local housing markets and property values.
What You Can Do Right Now
Start with defensible space. It's the single most impactful thing you control. Walk your property and identify what needs clearing or trimming. California's CAL FIRE website offers detailed guidance for each zone. Many fire departments offer free defensible space inspections—take advantage of them.
Consider home hardening improvements: Class A fire-resistant roofing, enclosed eaves, dual-pane windows, and non-combustible fencing. These upgrades cost money upfront but can make the difference between getting coverage or not. Document everything with photos and keep receipts—you may need proof for insurance applications.
Shop around aggressively for coverage. Work with an independent insurance agent who can access multiple carriers. Some smaller regional insurers still write policies in high-risk areas when the big national companies won't. If you're stuck with a FAIR Plan, price out wrap policies from multiple providers to get the additional coverage you need.
The wildfire insurance crisis isn't solving itself anytime soon. But regulatory changes are coming, mitigation measures do make a difference, and options exist even when they're not obvious. Stay proactive about defensible space, keep shopping for better coverage, and don't assume you're stuck with whatever insurance situation you're in today. The market is shifting—make sure you're positioned to take advantage when it does.
