California’s Home Insurance Crisis, Explained
The Challenge
Securing homeowners insurance in California has rapidly evolved from a routine step to a critical hurdle. In many wildfire-prone areas, insurance availability and affordability have become top concerns—enough to derail home sales. Many buyers are struggling to close escrow not due to financing, but because lenders won’t proceed without proof of insurance.
A 2024 survey by the California Association of Realtors found:
13% of agents reported at least one transaction was canceled due to insurance challenges.
Nearly 7% of all escrows statewide collapsed for similar reasons—most commonly because buyers couldn’t find a policy or pulled out over steep premiums .
Sacramento agents even say it’s become standard practice to start insurance shopping on day one, or risk losing the deal.
What’s Behind the Coverage Crunch?
Insurer Retrenchment
Major carriers have shrunk their footprint in California—refusing new business in high-risk zones or exiting altogether. This has made insurance harder to find and more costly.
Rising Premiums Amid Inflation
From 2019 to 2024, homeowners insurance rates surged by 48.4%—the steepest increase on the West Coast . Rebuilding costs, labor shortages, and material inflation are pushing replacement costs—and premiums—higher .
Dependence on State-Run Insurance
More Californians are turning to the FAIR Plan—the state’s insurer of last resort. Enrollment nearly doubled, from ~330,000 in September 2023 to over 610,000 by June 2025. This surge underscores the growing inability of the private market to meet demand.
Why This Matters for Real Estate Agents and Buyers
Escrow falls through when insurance can’t be secured. Without coverage, lenders may refuse to finalize loans—even after inspections and approvals.
Affordability takes a hit—premium spikes and limited options can push buyers right out of the market.
High-risk zones face stagnation. Without viable insurance, properties in wildfire-prone or catastrophe-prone areas risk being left unsold.
This is not just a homeowners’ issue—it’s a structural challenge impacting transactions, financing, and market stability. Insurance has become part of the buying decision itself.
How Millsap Insurance Can Help
As an independent insurance broker, Millsap Insurance has what buyers and agents desperately need:
Access to multiple carriers
Unlike captive agents, we can quote across a broad network—including surplus lines insurers—giving clients better chances at coverage.
Timely expertise
From day one, we guide buyers and agents through the maze of options, ensuring insurance readiness aligns with escrow timing.
Strategic assistance
We help evaluate FAIR Plan options, recommend mitigation steps that improve insurability, and identify endorsements to fill coverage gaps.
Bottom Line
California’s home insurance crisis is undermining real estate transactions. From canceled escrows to exhausted buyers, the ripple effects are real and urgent. But with early planning and the right insurance partner, agents and buyers can navigate successfully.
That’s where Millsap Insurance steps in—making insurance as seamless as possible so your deals don’t fall apart at the finish line.
Sources:
https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/ideas-and-insights/how-climate-risk-and-losses-are-creating-high-prices-for-home-insurance?
https://www.sfgate.com/california/article/calif-use-last-resort-insurer-nearly-doubles-20819295.php?
