For the past several years, homeowners insurance has become an increasingly important—and increasingly frustrating—part of buying a home in California. Major insurers reduced their exposure to the state, homeowners faced nonrenewals, premiums increased, and more properties were pushed into the California FAIR Plan. In parts of Los Angeles with elevated wildfire exposure, buyers sometimes discovered that obtaining insurance was considerably more difficult and expensive than they anticipated.
There are now some encouraging signs that California’s owners insurance market may be stabilizing. But buyers should be careful not to confuse improvement with a return to the old normal. Homeowners insurance generally remains obtainable, but buyers should no longer treat insurance as a routine administrative matter to address near the end of escrow. Instead, insurance has become an important part of a buyer’s due diligence—and one that should begin early in the transaction.
California’s Insurance Problem
California’s homeowners insurance problems are the product of several overlapping factors, including increasing wildfire losses, rising construction and replacement costs, reinsurance costs, and disagreements between insurers and state regulators regarding how those risks should be incorporated into insurance rates.
As traditional insurers became more selective about the properties they were willing to insure, an increasing number of homeowners turned to the California FAIR Plan. The FAIR Plan is not a government insurance company. It is an association of insurers authorized to do business in California and serves as the state’s insurer of last resort for property owners who cannot reasonably obtain coverage in the traditional market. Its growth illustrates just how dramatically California’s homeowners insurance market has changed.
According to the California FAIR Plan, there were approximately 696,562 dwelling and commercial policies in force as of June 2026, an increase of 8% since September 2025 and an extraordinary 157% increase since September 2022. The amount of property exposure insured by the FAIR Plan has grown even faster. Total exposure reached approximately $768 billion as of June 2026, up 11% since September 2025 and approximately 250% since September 2022.
Those numbers make clear that California’s homeowners insurance problem has not disappeared.
Encouraging Signs Of Improvement
There are nevertheless reasons for cautious optimism. Perhaps the most interesting statistic is the rate at which new policies are entering the FAIR Plan.
During the first nine months of the FAIR Plan’s 2026 fiscal year, it wrote approximately 151,061 new policies, or an average of 16,784 per month. Although that remains an enormous number, the monthly average was approximately 25% lower than during the prior fiscal year. In other words, the FAIR Plan continues to grow, but the rate at which consumers are being pushed toward the insurer of last resort appears to be slowing.
There have also been signs of renewed activity in the traditional insurance market. California’s Department of Insurance has been implementing its Sustainable Insurance Strategy, which is intended to encourage insurers to write more policies in areas with significant wildfire exposure while allowing insurers greater flexibility in incorporating catastrophe modeling and reinsurance costs into their rates. More recently, the Department announced commitments by several insurers to maintain or expand their presence in California. USAA has announced plans to expand homeowners insurance access beginning in 2027, PURE plans to expand its California homeowners business, and MS Transverse has entered California’s homeowners insurance market. Other major insurers have also committed to remaining in or expanding their California operations.
Those developments are meaningful. But they do not mean California has suddenly returned to the homeowners insurance environment buyers experienced ten years ago.
The Impact On Los Angeles Transactions
Our experience in the Los Angeles market is more nuanced than some of the headlines about California’s insurance crisis might suggest. Homeowners insurance is generally still available and procurable. The difference is that obtaining it can require more work.
Premiums are higher. There may be fewer insurers competing for a particular property. Buyers may need to contact multiple insurance agents or brokers before finding appropriate coverage, particularly when purchasing homes in hillside communities, wildfire-risk areas, or locations where insurers have tightened their underwriting requirements. That makes timing increasingly important.
A buyer who waits until shortly before the expiration of contingencies—or worse, until immediately before closing—to investigate insurance may unnecessarily create a problem that could have been identified and addressed much earlier. Our recommendation is therefore straightforward: Begin investigating homeowners insurance as early as possible after entering into a purchase agreement.
For properties where insurability could reasonably be a concern, buyers may even want to make preliminary inquiries before submitting an offer. This does not mean buyers should panic about homeowners insurance. It means they should treat it with the same seriousness they give inspections, financing, title, disclosures, and other aspects of due diligence.
The FAIR Plan Is a Safety Net, Not A Substitute for Homeowners Insurance
Buyers should also understand what it means when someone says, “You can always get the FAIR Plan.” Technically, the FAIR Plan provides an important insurance option when traditional coverage cannot reasonably be obtained. But a basic FAIR Plan policy is not equivalent to the comprehensive homeowners policy many consumers are accustomed to purchasing.
The California Department of Insurance explains that basic FAIR Plan coverage applies to specified risks including fire, lightning, internal explosion, and smoke, with certain additional coverage available for an additional premium. It does not automatically include several protections commonly found in traditional homeowners policies, including theft and liability coverage.
For that reason, homeowners using the FAIR Plan often purchase a separate Difference in Conditions (DIC) policy—sometimes called a wraparound policy—to provide additional coverage. The combination of a FAIR Plan policy and DIC coverage can therefore provide a homeowner with protection more comparable to a traditional homeowners policy. But it can also mean dealing with multiple policies, potentially higher premiums, and additional complexity.
A buyer evaluating the cost of owning a home should therefore look beyond the simple question of whether the property can be insured. The better questions are: What coverage is available, from whom, at what price, and with what limitations?
Sellers Should Be Thinking About Homeowners Insurance Too
Insurance is not solely a buyer issue. Sellers—particularly those selling homes in areas known to present insurance challenges—should recognize that the availability and cost of coverage can affect the pool of potential purchasers.
A buyer who discovers an unexpected insurance problem late in escrow may become concerned about the property, request additional time for due diligence, attempt to renegotiate, or potentially exercise an available contingency. Sellers and their agents therefore benefit from understanding whether insurance is likely to present an obstacle before the property is under contract.
That does not necessarily mean obtaining insurance quotes on behalf of future buyers, since underwriting depends on the buyer, carrier and coverage sought. It does mean that insurance should be considered when preparing a property for market and anticipating potential transaction issues.
A Better Homeowners Insurance Market Does Not Mean Buyers Can Become Complacent
California appears to be making some progress toward a more functional homeowners insurance market. The declining rate of new FAIR Plan business and announcements that insurers are maintaining or expanding their California presence are encouraging developments. But nearly 700,000 FAIR Plan dwelling and commercial policies and approximately $768 billion of FAIR Plan exposure demonstrate how far the market still has to go.
For Los Angeles homebuyers, the practical lesson is therefore not particularly complicated. Insurance is available—but diligence matters. Buyers should investigate coverage early, compare available options, understand exactly what a proposed policy covers, and incorporate the actual cost of insurance into their analysis of the property.
The California homeowners insurance market may be changing again. The homebuying process should change with it.
Please call or email us at 213-973-9439 or info@esquirereb.com to further discuss California’s homeowners insurance developments, or how Esquire Real Estate Brokerage can help you in the Southern California real estate market.
