California Home Insurance Costs Moderate but Rising with New Climate Risk Rules

California's median home insurance premiums remain mid-range nationally at approximately $1,200 annually, despite escalating wildfire risks and increasing costs. A recent UC Berkeley Terner Center report highlights that while overall premiums are moderate, low-income homeowners, particularly those earning under $66,000 annually, allocate a much larger portion—around 3%—of their income to home insurance, underscoring affordability challenges that may intensify with rising rates. The report contrasts California’s insurance costs with states prone to hurricanes and tornadoes, such as Florida and Louisiana, where premiums are significantly higher, often exceeding $1,700 annually. However, California has experienced double-digit rate hikes recently as insurers reduce coverage and withdraw from high-risk wildfire zones due to regulatory constraints and rising claims. In response, state regulators have introduced reforms permitting insurers to use climate risk models to justify premium increases, a change from the previous ban unique to California. This regulatory shift aims to incentivize insurer participation in fire-prone areas by aligning rates with actual risk, potentially increasing premiums but expanding coverage options for homeowners displaced from the high-cost FAIR Plan insurance pool, which has nearly doubled to 625,000 policies. Consumer advocates remain cautious about the reforms, expressing concerns that rate increases may outweigh coverage expansion benefits and questioning insurer commitments to servicing high-risk regions effectively. The report also reveals that 16% of Californian homeowners without mortgages are uninsured, a figure higher in rural and fire-prone areas like the Sierra foothills. Overall, the evolving regulatory landscape and climate-related risk factors are reshaping California’s home insurance market dynamics, emphasizing the need for policies balancing affordability, risk-based pricing, and coverage accessibility to protect vulnerable homeowners and mitigate displacement risks.