Nevada's New Wildfire Exclusion Law: Impacts on Homeowners Insurance

A recent legislative development in Nevada will allow insurers to exclude wildfire damage from homeowners policies starting in 2026. This new law offers insurers legal clarity to opt-out of covering wildfire damage in standard policies issued after January 1 of that year. Insurers can choose to offer separate wildfire-specific policies alongside traditional homeowners coverage, a move that may influence pricing and risk management strategies in the industry.

This legislation, designed as a four-year pilot program, enables insurance companies to explore innovative underwriting adjustments. Passed with broad bipartisan support and signed into law by Governor Joe Lombardo, it does not obligate insurers to separate wildfire coverage. Instead, it provides an option similar to existing practices in other states, such as California excluding earthquake damage, and Texas and Florida offering standalone windstorm and hurricane policies.

The regulatory change highlights Nevada's attempt to address escalating homeowners insurance costs, which impact homeownership affordability. By allowing the omission of wildfire coverage, the law aims to curb premium hikes and mitigate the risk of insurers withdrawing from underwriting in high-risk zones. This structural change in policy offerings reflects Nevada's strategic response to regulatory compliance requirements in the face of natural disasters.

Comparative Context: FAIR Plans and Coverage Mandates

Unlike California, Nevada lacks Fair Access to Insurance Requirements (FAIR) plans that provide a safety net for property owners needing essential coverage. In California, regulatory compliance mandates specific fire coverage in standard policies, prohibiting selective removal without a legislative overhaul. This puts Nevada’s regulatory approach in contrast with other states that have more protective measures in place for consumers.

Implications on Real Estate and Insurance Markets

Data reflecting the consequences of wildfire exclusion highlight significant concerns within the industry. A recent Redfin report indicates that nearly 40% of land in severely impacted regions is being acquired by real estate investors. This trend continues even after a moratorium on speculative purchases was briefly imposed by the Nevada governor. Local Redfin agent Sylva Khayalian notes that insufficient insurance coverage often compels property owners to sell, impacting both payer and provider dynamics.

Khayalian also observed that in areas like Pacific Palisades, Altadena, and Malibu, there is a surplus of listings over sales transactions. She reports that insurance premium costs have surged between 35% and 50% following recent wildfires. Zillow estimates that approximately 19,605 homes, valued at about $46 billion, were located within two major fire zones alone. As the broader real estate market faces moderated price growth, Nevada’s new regulation offers an essential framework for insurance carriers navigating future disaster-related challenges.