The recent wildfires in Los Angeles are raising serious questions about the future of home insurance in California. As wildfires become more frequent and severe, insurance companies are reassessing their risk models, leading to higher premiums and stricter coverage limits. California Insider spoke with former California Insurance Commissioner Dave Jones to break down what this means for homeowners, the role of the FAIR Plan, and what Californians can do to protect themselves financially.
Why Insurance Rates Are Rising
Siyamak Khorrami: Dave, people are concerned about how these fires will affect insurance. What do you see happening?Dave Jones: This isn’t just a California issue. Across the U.S., insurers are struggling to stay profitable as extreme weather events—including hurricanes, tornadoes, droughts, floods, and wildfires—become more severe. These disasters are causing record financial losses for the insurance industry.
Insurance companies are responding in two ways: raising prices and cutting back on coverage. In California, many insurers have stopped renewing home insurance policies in high-risk areas or have stopped writing new policies altogether. This isn’t just a short-term adjustment—it’s a larger shift in how the industry approaches risk. The challenge now is keeping insurance accessible while making sure companies can stay in business as climate risks grow.
The Cost of the LA Wildfires
Siyamak Khorrami: How much is the damage, and how will this impact homeowners?Dave Jones: Economic losses could reach $150 billion, with insured losses estimated at $20 billion. That’s even higher than the 2018 Camp Fire, which resulted in about $15 billion in insured losses.
Several factors are driving up costs. More than 12,000 structures have been destroyed, and many of them are in high-value areas like Pacific Palisades, where rebuilding costs are significantly higher. Beyond property damage, businesses that were forced to close are facing lost revenue, impacting employees and local economies.
Cities will also need to rebuild roads, utilities, and public services, which could lead to tax increases or budget cuts elsewhere. Businesses may see higher insurance costs, making it harder to reopen—or they may relocate altogether, creating long-term economic shifts. The financial impact extends well beyond the immediate damage.
Will Insurance Costs Go Up for Everyone?
Siyamak Khorrami: If the FAIR Plan runs out of funds, will all policyholders have to pay?
Dave Jones: Yes, and that would be in addition to homeowners and businesses already paying higher premiums. The FAIR Plan was designed as a last resort for properties that private insurers won’t cover, but it has financial limits. If claims exceed its reserves, it can charge insurance companies to make up the difference. Under California’s rules, these costs can also be passed on to all policyholders through additional fees.
That means Californians could see their insurance costs go up—not just from higher premiums, but also from these FAIR Plan assessments. It’s a system meant to ensure wildfire victims get their payouts, but it spreads the financial burden across a much larger group.
What Insurance Covers for Wildfire Victims
Siyamak Khorrami: What kind of coverage do wildfire victims get?Dave Jones: Most home insurance policies include additional living expenses, which cover costs like temporary housing, meals, and other essentials if a home is unlivable. Some policies also cover storage fees and even pet boarding.
Replacement coverage pays to rebuild the home, but homeowners should make sure their policy covers the full cost to rebuild—not just the market value. Construction costs have gone up, and if a policy isn’t updated, homeowners could end up underinsured.
Siyamak Khorrami: The FAIR Plan only covers up to $3 million. Is that enough?
Dave Jones: That’s correct, and in areas with high property values, some homes will exceed that limit. Homeowners need to be aware of coverage gaps and consider additional insurance if necessary.
The Burden on Homeowners with Mortgages
Siyamak Khorrami: If a home burns down, do homeowners still have to pay their mortgage?Dave Jones: Yes. The mortgage is still in place, even if the home is destroyed. Homeowners should contact their lender immediately after a loss to discuss relief options, such as deferred payments or loan modifications.
Mortgage agreements also require insurance coverage. If a homeowner doesn’t maintain coverage, the lender can purchase force-placed insurance, which is usually more expensive and offers less coverage than a standard policy. Keeping insurance up to date is crucial to avoid these added costs.
How to Get Reimbursed by Insurance
Siyamak Khorrami: What should homeowners do to make sure they get reimbursed correctly?Dave Jones: First, get a copy of your insurance policy. If it was lost in the fire, contact your agent or company immediately. Then, file a claim as soon as possible.
California law requires insurers to start issuing payments quickly, even if homeowners don’t have every receipt or inventory detail right away. But keeping records helps. Take photos of damage, make a list of lost belongings, and save receipts for any immediate expenses like hotel stays or meals. Many insurers offer advance payments to cover urgent needs, so policyholders should ask about those options.
If homeowners have trouble with their insurer, they can contact the California Department of Insurance for assistance.
The Difference Between Admitted and Non-Admitted Insurance Companies
Siyamak Khorrami: What’s the difference between admitted and non-admitted insurance companies?Dave Jones: Admitted insurance companies are the ones most people know—the ones you see advertised. They are regulated by the state and must follow strict pricing and coverage rules.
Non-admitted insurers, also known as surplus lines, operate with fewer restrictions. Companies like Lloyd’s or Zurich can sell policies, but their prices aren’t regulated, which can mean higher costs but also more coverage options for homeowners who can’t find insurance elsewhere.
How Much Will Insurance Rates Go Up?
Siyamak Khorrami: Do you have a prediction for rate increases?Dave Jones: Insurers are preparing to request major rate hikes—potentially 10 to 60 percent, depending on the risk level of a home.
Several factors will determine how much rates go up, including wildfire risk zones, proximity to recent fires, and the cost to rebuild. Homes in high-risk areas will see the largest increases, especially if they haven’t taken steps like clearing defensible space or installing fire-resistant materials.
California’s recent regulatory changes give insurers more flexibility in adjusting rates, which means even homeowners in lower-risk areas could see increases. Some insurers may also introduce stricter rules for underwriting, making it harder to get or renew coverage.
Is California Becoming Uninsurable?
Siyamak Khorrami: Some argue that poor forest management—not climate change—is the real issue. What do you think?Dave Jones: Forest management is a major problem. Decades of fire suppression have led to overgrown forests with excessive dry fuel. Indigenous fire management practices were abandoned, and now we have more intense wildfires.
But climate change is making it worse. Higher temperatures, prolonged droughts, and stronger winds are creating longer fire seasons and more extreme fires.
We need to do both—improve land management through controlled burns and thinning while also addressing climate change. Without a comprehensive approach, wildfires will keep getting worse.
What’s Next for California’s Insurance Market?
Siyamak Khorrami: Where do you see things going?Dave Jones: In the short term, some insurers may return to the market, but long term, increasing wildfire risks will make certain areas harder to insure. If extreme weather events continue at this pace, we’re moving toward a future where parts of the country—including some in California—become uninsurable.
Siyamak Khorrami: Dave Jones, former Insurance Commissioner of California, thanks for joining us.
Dave Jones: Thanks for having me.
