California Insurance Update: FAIR Plan Gets More Expensive, But Traditional Insurers Re-Enter the Market

By Alex Lewicki, Esq.

Home insurance has, not-so-secretly, developed into an industry-wide crisis over the last decade. For many in hillside and rural communities, the California FAIR Plan has been the only respite from prohibitively expensive insurance and, in some cases, the complete absence of fire insurance from traditional carriers.

Well, do not blame the messenger. The FAIR Plan has announced that it will increase its average rates by 29% this October. The rate hikes are largely a result of the 44% increase in policies issued from 2024 through 2025 plus the $4 billion in losses generated by the LA wildfires. This approved raise is down from the 36% increase that the Plan previously requested last year in an attempt to avoid bankruptcy.

The good news is that not all 600,000+ policyholders under the FAIR Plan will see their premiums rise. Roughly a quarter of policyholders in lower-risk zones will actually see their rates decrease by up to 80%, while another half of policyholders will see their rates increase between 30% to 50%. The remaining quarter will see varied rates, some below the 30% increase, with others in the most high-risk areas, such as those in the Nevada foothills, potentially seeing their annual premiums double come fall.

But while the insurance market becomes more expensive for some, there is also hope on the horizon as admitted carriers slowly return to the state. This re-entry is largely a result of the state’s recent efforts to allow insurers to adjust rates according to technology-driven catastrophe modeling systems. The statewide push toward wildfire mitigation efforts, such as mandatory home hardening and defensible-space regulations in high fire-risk areas, has also prompted major insurers to begin issuing policies once again.

So far, these efforts have resulted in less reliance on the FAIR Plan, which added only 16,000 new policies in the first quarter of 2026, down from 35,000 and even 50,000 new policies issued in previous quarters of 2024 and 2025. The Department of Insurance has further touted the insurance market’s stabilization by noting that nine insurance groups have requested rate increases below 7% so far. While that may seem like bad news at first glance, rate increases by major insurers, which previously were declining to issue new policies and dropping policyholders altogether, is a step in the right direction.

The hope is that increased competition will eventually bring rates down, and at the very least, ease reliance on the FAIR Plan for many residents in areas such as Los Altos Hills, Woodside, and Portola Valley. Perhaps the combination of insurance-friendly regulations and increasing mitigation efforts will return the FAIR Plan to the last-resort option that it was always intended to be.

One thing is certain: the California home insurance market has become more complex than ever before, and the right guidance has become absolutely necessary for buyers, even in areas that are not traditionally high fire-risk areas. Recently, I have even seen a listing agent suggest submitting an insurance quote alongside an offer as a consideration of buyer strength and seriousness.

Luckily, buyers working with the DeLeon Team have access to the right insurers, neighborhood-specific insights, and guidance that includes when to walk away from a home due to insurance risks. Give me a call today at 650.847.7407 to benefit from insurance clarity prior to purchasing a home.

Alexander Lewicki (DRE #02189814) | alexander@deleonrealty.com | 650.847.7407

DeLeon Realty, Inc. | DRE #01903224 | Equal Housing Opportunity