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Will California homeowners lose access to wildfire insurance? 

Over the past few years, wildfires in California have become increasingly common. Unfortunately, it is unlikely that this is going to change for the better any time soon. On the contrary, it is only expected to get worse. Which is worrying for many Californians who have not yet been affected but who have come close to experiencing fire damage.

To add to their concerns, private insurance companies are threatening to stop covering wildfires for these homeowners. Fires cause a huge amount of damage to homes, and insurance companies have had to pay out policies worth hundreds of thousands or millions to owners of California mansions.

Most insurance providers have stopped providing wildfire coverage to these homeowners. But if the wildfires do get worse and destroy the homes of those who have not yet been affected, they could lead to the bankruptcy of various insurance providers.

For now, Insurance Commissioner Richard Lara has put a stopgap measure in place to prevent insurers from dropping fire coverage for California homeowners on the fringes of previous wildfires. However, this moratorium is only set to last a year, after which insurers may refuse to provide or renew fire coverage to these homeowners.

Is there a solution that suits insurers and homeowners alike? Let’s take a quick look at how insurance companies cover fires in the first place.

What fire damage does homeowners insurance cover?

Homeowners insurance policies typically include fire damage coverage. They cover claims for damages to the property itself as well as the destruction of possessions. Generally, all types of fires that are unintentional are covered.

These include:

  • grease fires
  • candle fires
  • fires caused by electrical faults
  • lightning and natural disasters
  • fires caused by vandalism


Of course, homeowners insurance does not cover fires set intentionally by the homeowner. Neither does it cover fires caused by war. In areas already ravaged by wildfires, most companies do not provide wildfire coverage.

With many Californians on the verge of falling into the latter category, what can we expect to be done?

California wildfire insurance

A similar problem was caused by the 1994 Northridge Earthquake which damaged heavily populated areas of Los Angeles. At the time, insurance companies protested having to cover earthquakes, cancelling their earthquake cover for fear of bankruptcy in case of another disaster.

For this reason, the California Earthquake Authority (CEA) came into being. The CEA covers earthquake insurance for Californians, taking the responsibility away from the private insurers. This is similar to how the Federal Emergency Management Agency (FEMA) covers flooding insurance.

Can we expect a California Wildfire Authority to come into being which will cover wildfire damage? That is a solution touted by some experts, but considering how FEMA has changed its flood insurance program in 2021, that might be overly optimistic.

FEMA and price hikes

In 2021, FEMA changed the way they price flooding insurance. Instead of subsidising the high risk areas with averagely priced premiums across the country, they started charging according to risk. Homeowners in particularly vulnerable areas saw huge price hikes on flooding insurance.

The reasoning behind these price hikes is what will concern California homeowners. They did not hike prices simply in order to cover the risks of flooding in these areas. They did so in order to discourage buyers from buying homes in these areas. Certain parts of the country are simply no longer viable spots to build or buy homes. Beachfront mansions in Florida, for example, may fall victim to rising sea levels.

As such, it may be idealistic to think that the California state government will start a program that provides reasonably-priced wildfire insurance to homeowners whose homes are highly likely to fall victim to wildfires in the near future.

The problem is that the insurance companies are right. These homes are likely to suffer huge damage which will force the companies to pay out huge claims. What happens next? Do homeowners rebuild on a regular basis, hoping that wildfires will come to an unlikely end?

Wildfires are the issue at hand, not the reticence of insurance companies to go bankrupt paying out huge claims. While insurance companies are infamous for doing whatever they can to avoid payouts, in this case their very existence is at stake for the sake of homes in areas that may simply no longer be viable for residential living.

It remains to be seen what will happen with future wildfires and whether insurance agencies will be able to get out of paying for wildfire claims. Unfortunately, this is a problem that will not go away and has no easy solution.

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About the author: Access Publishing

Scott Brennan is the publisher of this newspaper and founder of Access Publishing. Connect with him on Paso Robles Daily News on Google, Twitter, LinkedIn, or follow his blog.