LA wildfires highlight nation's insurance crisis as homeowners try to recover lost homes

The nation’s growing home insurance crisis is in the spotlight as Californians begin the long road to rebuilding after the deadly Eaton and Palisades wildfires.

For neighbors Louise Hamlin and Chris Wilson, the difference in insurance coverage on their nearly identical homes in Altadena reveals how unequal that recovery will be.

Hamlin was privately insured and has already been paid out nearly a million dollars. She is searching for contractors to rebuild her house.

Wilson will receive a fraction of what he needs because he was covered by the California Fair Access to Insurance Requirements Plan — the state’s bare-bones insurance program known as the FAIR Plan. He is contemplating loans, lawsuits and moving his family out of California.

How do people get on the FAIR Plan?

The plan is a temporary coverage option created by the state as a last resort for homeowners who can't find private insurance. More Californians are relying on it than ever after several major insurance companies either paused or restricted new business in the state in recent years.

In Wilson’s case, his private insurer declined to renew his policy last year although he offered to install various fire mitigation efforts. No other insurers were willing to write him a new policy, forcing Wilson to get on the FAIR Plan to satisfy his mortgage requirements.

The number of FAIR residential policies issued in the state more than doubled between 2020 and 2024, reaching nearly 452,000 policies.

Higher premiums, less coverage

Under the FAIR Plan, Wilson paid about 60% more in premiums related to the fire than Hamlin, though he is slated to receive less than half the coverage. And his true home insurance cost was actually much higher because he also had to buy “wrap-around insurance” for issues the FAIR Plan doesn’t cover, such as burst pipes or falling objects.

The Insurance Information Institute, which represents many major insurers, said the FAIR Plan provides a lifeline for homeowners who cannot find private insurance, and that outcomes would be far worse if homeowners had no coverage at all.

What are the solutions?

State officials have rolled out several new regulations to give insurers more latitude to raise premiums in exchange for issuing more policies in high-risk areas. That includes allowing insurers to consider climate change when setting their prices and allowing them pass on the costs of reinsurance to California consumers.

Governments also have to shoulder the costs for serious mitigation efforts, or the price of California’s fire risk will remain unequal and left to the homeowners, said Stephen Collier, a professor of urban planning at University of California, Berkeley. California is proposing to direct roughly $25 million from a voter-approved climate bond to bolster fire mitigation requirements around homes.