California homeowners with State Farm policies can soon expect a 17% rate increase. The increase will go into effect for more than one million home insurance policies that renew after June 1.
The increase also applies to renters and condo policies. A 15% general increase to condos and renters insurance and a 38% increase for landlord insurance will go into effect.
State Farm asked for ‘emergency relief’
In February, State Farm asked the California Department of Insurance (DOI) for a 22% emergency rate increase. The insurer said it needed the increase to stay solvent and cited the 2025 Southern California wildfires in its request.
During a hearing in April, a judge ruled in favor of State Farm’s emergency rate increase. The approval was a “fundamentally fair, adequate, and reasonable decision” due to State Farm’s “precariously weak position,” the judge ruled.
California Insurance Commissioner Ricardo Lara also approved the decision.
“I am balancing all the facts,” he said in a press release. “Protecting all State Farm customers and the integrity of our insurance market is an urgent matter.”
California has the second-fastest rising home insurance premiums in the U.S., according to a recent Insurify report. Insurify data scientists estimated that the state’s homeowners insurance prices will rise 21% by the end of 2025, from $2,424 per year to $2,930.
State Farm’s presence in California
State Farm currently insures over 20% — about a million — of California homes. The insurer dropped 30,000 policies last spring.
The company is no stranger to rate hikes. It requested a 30% increase in 2024 before initially requesting a 22% emergency rate increase in February 2025.
The Eaton and Palisades wildfires caused an estimated $7 billion in damages to State Farm-insured homes, with $3.5 billion paid out for claims, according to a company spokesperson. As a result, the insurer’s surplus dropped from $2.2 billion in 2022 to $620 million in 2024.
Insurers use surpluses to pay out claims, and it helps determine a company’s financial strength. A low surplus could mean State Farm isn’t financially strong enough to pay out claims.
Rate hike still has obstacles to clear
The judge ruled that the 17% emergency rate increase is interim, and the approval comes with stipulations:
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Lara and the California Office of Independent Review (OIR) will hold another hearing to determine if the increase is excessive and to follow California’s rate increase laws.
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State Farm has to pay back homeowners plus interest if the OIR finds the increase to be excessive.
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The insurer can’t send any home insurance non-renewals for the remainder of 2025.
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The insurer’s parent company, State Farm Automobile Insurance, will grant it $400 million to increase its surplus.
Another hearing won’t happen until October at the earliest.
What’s next: Other insurers follow suit
State Farm isn’t the only insurer increasing rates. Other insurers issuing increases include CSAA, Allstate, and USAA.
* Interim rate approval.
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Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.