California Wildfires Expose Insurance Crisis as Costs and Coverage Gaps Mount

Thousands of homes have been destroyed in Los Angeles wildfires, revealing widespread underinsurance and challenges in accessing adequate coverage.

Recent wildfires in the Los Angeles area have destroyed over 12,000 structures, with damages estimated at $135 billion to $150 billion, making it one of the costliest disasters in U.S. history.
California's new regulation requires insurers to expand coverage in high-risk wildfire areas but allows them to pass on reinsurance costs to homeowners, potentially leading to significant premium increases.
Many homeowners in fire-prone areas have lost insurance policies as major carriers like State Farm and Allstate reduce their exposure, leaving residents to rely on the state-run FAIR Plan or go uninsured.
A study of past wildfire claims found that 74% of homeowners are underinsured, with many unable to fully rebuild their homes due to insufficient coverage limits.
The crisis highlights the growing challenges of insuring properties in the face of increasingly severe climate-driven disasters, raising concerns about the long-term sustainability of California's insurance market.