Navigating Wildfires and Insurance: A technical guide for communities and homeowners

Across the country, homeowners in wildfire-prone areas are seeing insurance premiums skyrocket—or receiving cancellation notices altogether. A combination of increased wildfire risk, catastrophic losses, and long-standing insurance market problems have created a growing crisis.

Several forces are driving up costs and pushing insurers out of wildfire-prone markets:

• Rising losses. Losses from wildfires are rising at 14% per year in the United States. The January 2025 Los Angeles wildfires alone caused an estimated $40 billion in insured losses—one of the costliest disaster events in U.S. history. Nationally, insurers paid out more in claims than they collected in premiums in 18 states in 2023. When companies lose money, they raise rates or leave.
• Advanced risk modeling. Insurers are now using sophisticated, proprietary computer models to assess wildfire risk for every individual property. Factors like vegetation type, slope, wind patterns, nearby structures, roof material, and distance from fire stations all feed into these models. Areas that seemed manageable a decade ago may now be priced as high risk.
• Surging reinsurance costs. Insurance companies buy their own insurance—called reinsurance—to protect against catastrophic losses. As global disaster losses have climbed (over $137 billion in weather-related losses in 2024 alone), reinsurance costs have soared. Those costs get passed along to homeowners. In the most disaster-exposed areas they added an average of $425 to annual homeowner premiums in 2024.
• Homes aren’t built for embers. Research shows the majority of homes destroyed in wildfires are ignited by wind-blown embers, not direct flame contact. Most homes were built before this was fully understood, and insurers price that vulnerability into premiums.
• Rising rebuilding costs. Construction labor shortages, supply chain disruptions, and sustained inflation have pushed rebuilding costs up more than 50% in many markets—nearly double the rate of inflation. This means many homeowners are now significantly underinsured relative to what it would cost to rebuild. When claims consistently exceed predictions, insurers raise rates or leave.

Insurance markets are responding to real and growing risk. The solution isn’t to ignore the risk; it’s to reduce it.

My policy was just cancelled. What do I do now?

You may have more options and time than you think. Here’s how to respond:

• Don’t wait—but don’t panic. Most states require insurers to give advance notice before a non-renewal takes effect. Read the notice carefully to confirm the date your coverage ends and the stated reason for the decision.
• Ask if mitigation work could reverse the decision. Contact your insurer or agent directly. Some companies will reconsider a non-renewal if you complete specific home hardening or defensible space work before the policy expires.
• Shop the independent market. Contact an independent insurance broker—one who works with multiple companies, not just one carrier. They can access a wider range of options, including insurers that cover higher-risk properties. This coverage is typically more expensive but is legitimate and regulated.
• Understand your state’s FAIR Plan—but treat it as a last resort. Most states have a Fair Access to Insurance Requirements (FAIR) Plan or equivalent program to provide basic coverage when private insurers won’t. FAIR Plans are real insurance, but they typically offer less coverage than standard policies and their premiums have been rising steeply. Use it if you need to, but keep shopping.
• Contact your state insurance commissioner. Every state has a department of insurance with a consumer assistance line. They can tell you what options are available in your area, whether your insurer followed proper procedures, and whether any state programs or grants exist to help you. Find your state’s department at naic.org/state_web_map.htm.
• Never let coverage lapse. If you have a mortgage, your lender requires insurance—and can purchase “force-placed” coverage on your behalf if you don’t maintain it. Force-placed insurance is typically far more expensive and covers only the lender’s interest, not yours. Secure replacement coverage before your current policy expires.

What does my homeowner’s policy cover, and what should I watch out for?

Many wildfire survivors are shocked to discover that their insurance covered far less than they expected. Understand your policy before a fire and be sure to review these key components:

• Dwelling coverage (Coverage A). This covers the cost to rebuild your home’s structure. The most common and serious problem after wildfires is underinsurance—when the policy limit isn’t enough to cover actual rebuilding costs, which have risen sharply in recent years.
• Personal property coverage (Coverage C). This covers your belongings—furniture, clothing, electronics, and more. Policies either pay “actual cash value” (what items are worth today, after depreciation) or “replacement cost value” (what it costs to buy equivalent new items). Replacement cost coverage is more expensive but is significantly better after a total loss.
• Additional Living Expenses (Coverage D). If your home becomes uninhabitable, this covers temporary housing, meals, and other costs while you’re displaced. Survivors of major wildfires have sometimes been displaced for two or three years while their communities are rebuilt.
• Debris removal. Clearing ash, hazardous materials, and burned structures from a lot can cost tens of thousands of dollars. Some policies include debris removal within the dwelling coverage; others have a separate sublimit. After large fires, demand surges and costs rise further. Make sure you understand what your policy covers.
• What’s typically not covered. Standard homeowner’s policies do not cover vehicles (those are covered by auto insurance), landscaping and trees in most cases, or losses caused by flooding, debris flows, or mudslides that often come after a wildfire burns away stabilizing vegetation. Some policies do not include coverage for building code upgrades (also called “Ordinance or Law Coverage”), which helps pay any extra costs of rebuilding a home to current standards. Depending on your state, your policy may not cover wildfire smoke damage. Courts in some states have determined that dwelling and contents coverage do apply to smoke damage, but many people still report trouble getting insurers to cover this type of damage.

What can I do to reduce my property’s risk?

There is a lot you can do to reduce your property’s risk, and many of the most effective actions are inexpensive and can be accomplished in a weekend. Insurers may reward verified risk reduction with renewals and discounts in some cases. The most important activities occur in three areas of the “Home Ignition Zone”:

• Your home itself: Replace vulnerable parts of your home (vents, roof, siding, and eaves) with ember- and flame-resistant materials.
• Zone 0 (0–5 ft): Eliminate all combustible items five feet out from your home’s foundation (including plants, mulch, and fencing).
• Zone 1 (5–30 ft): Maintain the area 30 feet out from your home to keep adequate separation between plants and between tree limbs and the ground. Don’t store combustible items in this area.

While individual action is necessary for home-level mitigation, action is also needed to ensure that entire communities are taking proactive steps to reduce wildfire risk. The decisions governments make today about insurance rates, building standards, and land use will determine whether homes in fire-prone areas remain insurable over the next decade.

How can adopting a wildland-urban interface code help my community?

Wildfire building codes are one of the most direct tools state and local governments have to improve wildfire safety and long-term insurability. Wildfire building codes will likely improve your community’s insurance availability, rather than drive non-renewals and premium hikes. Homes built to modern wildland-urban interface (WUI) standards survive wildfires at dramatically higher rates than older construction. Local governments can:

• Adopt wildfire building codes. This ensures that new development is built with wildfire in mind. The International Code Council’s International Wildland-Urban Interface Code is a model, consensus-based, baseline code that provides science-based standards for new construction. It also addresses water supply, egress, and more.
• Enforce the codes you have. Consistent inspection and enforcement ensure that community risk reduction is effective and improve insurability.
• Extend the reach to existing homes. Building codes only apply to new construction and significant remodels. Reaching the existing housing stock requires different tools, such as retrofit grant programs, disclosure requirements at point of sale, and incentive structures tied to insurance discounts.

Why do we need community-wide regulations? Can’t we rely on single homeowners to tackle mitigation on their own?

Unlike other natural hazards like wind or hail, wildfire risk is neighborhood-wide: once a single home ignites, all the others nearby are in extreme danger. A homeowner who hardens their own property is still at risk if their neighbors have not done the same. Solutions adopted across entire communities are the only way to meaningfully reduce wildfire risk—and with it, the pressures on insurance markets.

Will wildfire building codes cause local insurance rates to go up?

A common concern is that wildfire-focused building codes raise insurance costs, but the opposite is true. Insurance is priced based on risk. Homes built to WUI standards are less risky to insure, and the upfront investment in fire-resistant materials and design can pay off in long-term coverage availability. If insurers see actions that reduce risk, they have a better incentive to offer competitive rates.

Insurers have already mapped the risk and know where wildfire risk is high—their own models are often more granular than any state or local government hazard map. Passing a new wildfire building code will not alert them to a new risk. Communities that take meaningful, documented action now—adopting WUI codes, reducing fuels, hardening homes at scale, and constraining new development in the highest-risk areas—can demonstrate to insurers that the risk is being actively managed.

What other land use policies can we pursue to reduce our community’s wildfire risk?

Land use decisions made today will shape community insurability for decades. Every new subdivision approved in a high-risk area adds homes that will need insurance, require fire protection services, and depend on routes for evacuation. If communities lack the political will or staff capacity to adopt and enforce a broad wildfire building code, there are still many steps local governments can take to reduce risk.

• Embed wildfire into your long-range planning documents. A Community Wildfire Protection Plan (CWPP) is the most direct tool for coordinating wildfire resilience, and it can unlock federal funding. But a CWPP is most effective when integrated with a community’s comprehensive plans, hazard mitigation plans, and general plans. Long-range plans can lead to incremental improvements in zoning and development regulations, eventually making risk reduction part of everyday operations.
• Update zoning to reflect risk. Not all wildfire risk is equal. The most dangerous areas—those with steep terrain, high winds, heavy fuels, and limited egress—should not be approved for new residential development without extra conditions. Zoning maps and general plans can and should reflect current fire risk.
• Adopt subdivision design standards. Subdivision layout, street design, and site planning all affect how fire behaves in a neighborhood. Set minimum road widths and clearance heights on all access routes. Require that new developments have at least two points of ingress and egress. Establish setback standards that account for fire spread between structures, not just property lines. These standards can be written into subdivision regulations and development codes.
• Update landscaping regulations. Vegetation management across an entire neighborhood has a compounding effect on fire behavior and ember production. Adopt and enforce landscaping standards that prohibit plants, ground cover, and fencing materials that burn easily. Establish maintenance requirements—not just installation standards—so landscaping doesn’t become a hazard as it matures.

What can state regulators do?

Insurance is regulated state by state, which means states have significant power to shape whether private insurance remains available in wildfire-prone communities—or whether homeowners end up on expensive, state-run FAIR Plans that were never designed to serve as a primary market.

The instinct to cap rates is understandable, but in practice it backfires: when insurers can’t price to actual risk, they leave. When insurers use pricing based on actual risk, there are greater incentives for policyholders to proactively lower that risk. The more durable path is rewarding real risk reduction.

• Require discounts for verified mitigation. Several states are taking steps to require insurance discounts for homeowners who lower wildfire risk—installing a Class A roof, screening vents, or clearing vegetation within five feet of the home. These requirements give homeowners a direct financial incentive to act, give insurers a reason to stay in market, and meaningfully reduce risk.
• Fund mitigation assistance for lower-income households. Mitigation discounts only help people who can afford the improvements. State grant programs, such as the California Safe Homes grant program, can help lower-income households access the same risk-reduction tools and, by extension, the same insurance market benefits. Expanding these programs helps ensure risk reduction is community-wide.
• Allow forward-looking risk models. Most state regulations require insurers to base rates primarily on historical loss data. But wildfire risk is changing faster than history can capture. Allowing insurers to incorporate current risk models—including projected climate and vegetation conditions—gives them a more accurate picture of exposure and reduces the incentive to exit markets where historical data understates future risk.
• Streamline rate review. Approving rate changes can take months in some states. Slow review timelines prevent insurers from keeping pace with changing conditions, which pushes them toward exiting a market rather than making incremental adjustments. More transparent and timely review processes can keep private insurers engaged.
• Require risk disclosure at point of sale. Buyers who understand the wildfire risk of a property—including its insurance market status—can make informed decisions. Several states have moved toward risk disclosure requirements when a home is sold.

Resources

These organizations offer free, trusted resources for homeowners, community planners, and fire professionals:

Organization	What you’ll find
Your State’s Insurance Commissioner naic.org/state_web_map.htm	Each state has a department of insurance that can answer questions about your policy rights, available coverage options, FAIR Plans, and consumer assistance programs.
Community Planning Assistance for Wildfire (CPAW) / Headwaters Economics cpaw.headwaterseconomics.org	Free technical assistance on land use planning, zoning, and building codes for wildfire-prone communities. Especially useful for planners, fire departments, and county staff.
Wildfire Prepared Home™ wildfireprepared.org	Science-based home mitigation certification program with insurance discounts. Find a local assessor and learn what upgrades qualify. A program of the Insurance Institute for Business & Home Safety (IBHS).
Insurance Institute for Business & Home Safety (IBHS) ibhs.org/wildfire	Technical research on home vulnerability to wildfire, including ember intrusion, structural performance, and community-scale risk reduction strategies.
Insurance for Good insuranceforgood.org	Research and tools on how wildfire mitigation affects insurance availability and pricing. Focused on equitable outcomes for lower-income communities.
American Property Casualty Insurance Association (APCIA) apcia.org	Industry perspective on market trends, policy solutions, and community wildfire risk reduction frameworks.