California Home Insurance Crisis: Premiums Soar, Policies Canceled

California is currently ensnared in a significant home insurance crisis, characterized by dramatically increased rates and the cancellation of numerous policies. For homeowners such as Glenn and Lorraine Crawford, what once cost about $500 per month in 2012 has escalated to over $44,000 annually, with limited alternatives available.

This escalating crisis has led major insurers, including State Farm and Allstate, to stop accepting new policyholders in California, despite securing approval for substantial rate increases for existing customers. Farmers Insurance has also reduced its overall policy count, offering coverage to only a fraction of homes in fire-prone regions compared to previous years.

The situation has placed immense pressure on the state's Fair Plan, an insurer of last resort. Its bare-bones policies have seen a more than twofold increase in the past two years, indicating a growing number of homeowners unable to secure private insurance.

The repercussions extend to the housing market, with nearly one in five real estate agents reporting canceled sales last year due to clients' inability to obtain affordable insurance. This widespread insurance dysfunction has been years in the making, stemming from strict rate caps that eventually led insurers to withdraw coverage, citing rising losses from wildfires exacerbated by climate change.