California Home Insurance Costs to Jump Over 20%: What to Know

The cost of homeowner insurance across the U.S. is expected to continue rising this year, according to a new report by Insurify, with California seeing the second-biggest rate hike in the country after Louisiana.

Researchers at the comparison website estimate that homeowner insurance premiums in the Golden State will rise by 21 percent throughout 2025, for a projected average annual premium of $2,930 compared to $2,424 paid by California homeowners in 2024.

Why It Matters

Strict regulation in the Golden State has kept homeowners insurance premiums lower than they would have been if insurers were allowed to accurately price in risk despite more frequent and more severe natural disasters. The undesired result of such regulation is that it can drive carriers to cut coverage in California’s most vulnerable areas.

A series of non-renewals by some of California’s biggest insurers over the past five years have left homeowners struggling with limited availability on the private market and unaffordable rates, while the state’s fire insurance of last resort, the California FAIR Plan, has grown to be one of the largest in the state.

What To Know

California homeowners currently pay $1,335 per year or $111 per month for $300,000 of dwelling coverage, according to NerdWallet data. That’s 37 percent less than the national average of $2,100, despite the high wildfire risk the state is exposed to—a threat that is growing with climate change.

But things are about to change, as California regulators try to make the market more sustainable in the face of increasing catastrophe exposure, allowing the use of a new insurance model that will enable insurers to weigh future climate risks when pricing premiums.

After the devastating wildfires that ravaged Los Angeles County in January, where many homeowners had been dropped by their insurers only months before their properties were destroyed by the blazes, regulators have give preliminary approval to allow State Farm—the state’s largest homeowner insurer—to increase rates by an average of 22 percent.

Now Insurify researchers expect homeowner insurance rates in California to increase by 21 percent, while nationwide they will rise by a much lower 8 percent to reach $3,520 annually.

“This is one of the largest rate increases policyholders in California have experienced,” the company wrote in a statement shared with Newsweek. According to the company, the Palisades and Eaton fires that burned through hundreds of acres in Los Angeles County in January and regulatory changes in the state will contribute to this increase.

Total losses from the two fires, the largest to burn in January, have been estimated to reach up to $131 billion, including $45 billion in insured losses, according to a UCLA study.

The California FAIR Plan alone has to cover up to $4 billion in estimated losses and has recently received approval from state regulators to collect $1 billion from private insurance companies to cover over 3,400 claims related to the wildfires.

Insurers are expected to recoup part of these expenses by passing on the cost to policyholders, who are likely to face temporary fees on top of their insurance premiums.

In the wake of the fires, the California Department of Insurance (CDI) has also decided to allow carriers to file for rate increases based on climate risk projections rather than on historical data only—the sole option they have had until recently.

What People Are Saying

Daniel Lucas, carrier relations manager at Insurify, said in the report of California regulators’ recent reform: “The reform measure is meant to respond to the growing risks of wildfire and climate change in the state. The goal is to stabilize the California insurance market in order to allow carriers to write more policies profitably, which, in turn, means more options for consumers.”

What’s Next

California regulators are trying to encourage more competition to the state’s homeowners insurance market and trying to keep carriers from leaving.

A new rule passed at the beginning of the year requires insurers who have a 10 percent market share in the Golden State to cover 85 percent of homeowners in wildfire-prone areas. Carriers affected have to increase coverage in these areas by just 5 percent every two years until their policies reach the required total share.