In 2018, California experienced one of its most devastating wildfire seasons yet. The Camp Fire broke out in November, quickly ranking as the deadliest and most destructive in the state’s history. It killed 86 people, burned more than 153,000 acres, and destroyed over 18,000 structures.

Unfortunately, the Camp Fire wasn’t the only big wildfire in California in 2018; the Woolsey Fire burned nearly 97,000 acres of land west of Los Angeles, and the Hill Fire burned 4,500 acres in Ventura County.

The destructive 2018 season was not an isolated event either. Just one year prior, the Tubbs Fire burned nearly 37,000 acres and destroyed 5,643 structures. Of the 20 largest California wildfires listed on the California Department of Forestry and Fire Protection website, 15 have occurred since the year 2000.

Now in 2019, homeowners — especially in high-risk wildfire areas — are feeling the effects on their insurance. The devastating wildfire seasons the previous two years have hit insurers hard, and as a result, many homeowners are now experiencing rate increases, non-renewals and even an inability to find a company that will cover them.

But before we dive into the 2019 impact on homeowners insurance rates in California, why have the number of catastrophic wildfires increased recently? While there are multiple factors that increase the risk of destructive wildfires that cause property losses, long stretches of hot, dry weather and the spread of development into wildland areas top the list.

Weather plays a role

Like hurricane season and tornado season, there is a wildfire season that is dictated by weather patterns. A wet winter and mild spring provide water for fast-growing grasses, weeds, and brush, which spread rapidly through untended areas.

When the rains stop in the summer and these plants dry out, they become fuel for wildfires. The threat increases as winds pick up in the fall, because warm, dry winds spread fires quickly.

Long, hot, dry summers and high winds in the fall contribute to a wildfire season in California that can stretch on for months. The National Interagency Fire Center publishes a map of “significant wildfire potential” that reflects conditions and provides forecasts for wildfire-prone areas.

Wildlife-urban interface

Expansion of homes and businesses into areas that were previously remote has increased the risk for property loss. These developed areas that border large areas of wildland are called “wildlife-urban interface” areas (WUI).

These are developed areas that are more at risk for wildfires, and communities that fit this definition are increasing across the country, with California leading the way.

Insurance concerns in California

With the increasing number and size of fires and large property losses accumulating, California homeowners have something new to worry about — an inability to secure homeowners insurance coverage.

Destructive wildfires that lead to billions of dollars in losses, combined with a rate system that takes time for insurance rate increases to be approved has led to some insurance companies to simply stop offering coverage to homeowners and businesses located in California’s high-risk wildlife interface areas.

Homeowners are upset and frightened. Roughly 350,000 homeowners in 10 of the highest-risk counties are estimated to be affected by this surge of non-renewals. With entire communities facing coverage issues, problems can compound quickly.

Home insurance coverage is mandatory for mortgage approval, so if prospective home buyers can’t get coverage, housing values will sink and home sales will plummet. In addition to the resale problem, this also results in declining property taxes, which further harms a community.

What can California homeowners do?

Homeowners in high-risk areas have a few limited options. One option for homeowners who have received notice that their current policy isn’t being renewed is to try and find another insurance company that will provide coverage, but be prepared for some sticker shock. The Sacramento Bee reported that homeowners have been quoted replacement policies that are “two to three times as expensive” as their previous policy.

Some homeowners in high-risk areas have been able to purchase insurance through companies such as Lloyd’s of London, a “surplus lines” insurer that covers risks that traditional insurers won’t cover. However, even some of those policies are now being dropped.

California property owners can also buy into a “last resort” plan called FAIR. The Fair Access to Insurance Requirements (FAIR) plan was designed to help property owners struggling to insure a property deemed “high risk.”

While the FAIR plan does provide coverage, these are stripped-down policies of last resort. Covered perils are limited, and there are also restrictions on how much coverage can be purchased. Additionally, theft and liability coverage are not included.

Still, some coverage is better than no coverage at all. For homeowners who must resort to FAIR plans, purchase as much supplemental coverage as possible.

What’s next for California?

Property and casualty insurance companies that provide homeowners insurance have filed requests with the state for multiple rate increases. Both the FAIR plan and surplus carriers have expanded the numbers of policies sold — all of which points to a potential turning point for insurance coverage in the state.

If Californians continue to lose homeowners coverage, and insurers continue to experience ever-higher losses due to wildfires, the property insurance market in California will be under greater strain than ever before.

If you’re unhappy with your current homeowners insurance policy or are shopping for new home insurance in California, you can visit our best homeowners insurance companies in California page to browse top-rated companies in your area and get a quote from a new company!

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