California Homeowner Insurance Crisis: Rising Premiums and FAIR Plan Growth

Average California homeowner insurance premiums rose 84% between the end of 2020 and March 2026, according to a paper using recently available loan-level data. The report finds the California FAIR Plan now covers approximately 5% of the state’s single-family homes and backs about 6% of new single-family mortgage originations.

Average deductibles increased from $1,813 to $2,553 during the same period, the paper notes. Researchers identify the growing reliance on the FAIR Plan as a leading indicator of future instability in the housing market.

Why is the California FAIR Plan growing?

The FAIR Plan’s coverage of single-family homes grew from 1.5% in December 2020 to about 5% by March 2026. Michael Wara, CEPP director and co-author of the paper, stated that more than one in 17 new California home loans are now written with this specific coverage.

Wara described the FAIR Plan as the most limited and most expensive coverage option. According to Wara, this option is often the only available choice for new borrowers.

Did You Know? The California FAIR Plan was established in 1968 to remedy widespread insurance industry discrimination against communities of color.

What does the FAIR Plan cover?

The plan provides limited coverage, primarily for damage resulting from fire, smoke, lightning, and in-home explosions. It does not provide the comprehensive protection found in standard policies.

Because of these limits, nearly half of FAIR Plan customers pay for additional supplemental policies. This process requires homeowners to piece together coverage that is typically included in a single comprehensive policy.

Expert Insight: Samantha Carter notes that the shift toward the FAIR Plan represents a significant trade-off for homeowners. By accepting limited coverage at a higher price point, buyers may face increased financial vulnerability unless they can afford the supplemental policies required to mimic standard insurance.

What could happen to California housing?

The continued growth of the FAIR Plan’s footprint may make housing more out of reach for Californians. This outcome is likely if market fundamentals do not change, according to Wara.

Michael Wara: Understanding the wildfire insurance challenge in California

While Wara noted that the most recent data indicates some improvement, the trend of new mortgage originations relying on limited coverage suggests deeper trouble could lie ahead.

Frequently Asked Questions

How much did average insurance premiums increase?
Average premiums rose 84% between the end of 2020 and March 2026.

What is the current reach of the California FAIR Plan?
As of March 2026, it covers about 5% of single-family homes and backs approximately 6% of new single-family mortgage originations.

What specific perils does the FAIR Plan cover?
It covers damage from fire, smoke, lightning, and in-home explosions.

How do you think rising insurance costs will impact the future of homeownership in California?