Homeowner's Insurance 101: What LA Fire Survivors Need to Know

Most people don't think carefully about their homeowners insurance until they need it. Once a loss occurs, however, they need to understand everything at once: what's covered, what isn’t, and, in the context of rebuilding after a wildfire, whether they'll even be able to get insurance again once the rebuild is done.

Old assumptions may also no longer be relevant. The California insurance market has been changing the past several years, with new regulations and new approaches to wildfire risk. What was true before the January 2025 wildfires may not be true now. Since the 2017 and 2018 fires, major insurers have reduced or halted new policies in high-risk areas, and the number of homeowners on the state's FAIR Plan has grown substantially in high-risk areas.

In response, the California Department of Insurance has issued new regulations to encourage carriers to write more policies in high-risk areas, and some insurers are now focusing on wildfire loss reduction and looking for such investments among policyholders. Given this complexity, working with an independent agent or broker who specializes in wildfire-affected properties can be a valuable first step in understanding your options.

Here’s what wildfire survivors need to know about home insurance.

Home Insurance 101

The Core Components of a Homeowners Policy

A standard homeowners policy typically includes several types of coverage, but you should carefully review the terms and conditions of your policy since each one could be different:

• Dwelling coverage pays to rebuild the structure itself

• Code upgrade coverage will pay a certain amount for buildings to come into compliance with any updated codes since original construction

• Personal property coverage replaces belongings lost in a fire or disaster.

• Additional living expenses (ALE) covers temporary housing costs while you rebuild.

• Liability coverage protects you against lawsuits.

• ‘Other Structures’ covers detached garages, fences, and similar features.

Key Home Insurance Terms Worth Knowing

• Actual Cash Value (ACV) reimburses you for what your home was worth at the time of loss, factoring in depreciation.

• Replacement Cost Value (RCV) pays to rebuild at today's costs, making it significantly more valuable than ACV.

• Code upgrade coverage (also called ordinance or law coverage) helps cover the cost of bringing your rebuilt home up to current building codes.

• Extended or guaranteed replacement cost coverage provides additional protection beyond your policy's stated limits if rebuilding costs exceed what was estimated. This is an additional add-on that homeowners elect at the time of purchasing a new policy.

The Gap Between Insurance Payouts and Resilient Rebuilding

Insurance covers rebuilding to current California building codes (often WUI Chapter 7A requirements). That means standard policies typically don't cover upgrades beyond current code, resilient building materials above the minimum required, or Zone Zero landscaping improvements.

This is where the "resiliency delta"—the difference between a base-level, code-compliant home and what it costs to build a genuinely fire-resilient home—comes in. Insurance is based on replacing what was lost, not upgrading to a higher benchmark like the Insurance Institute for Business & Home Safety’s Wildfire Prepared Home Plus (IBHS WPH+), which means many homeowners who want to rebuild stronger will face out-of-pocket costs. Fortunately, those additional expenses are more modest than many realize and could avoid billions in future economic losses, according to research by Headwaters Economics and Insurance for Good. And resources like the Resilient LA Delta Fund and PILLAR platform are designed to help homeowners bridge that financial gap.

Why Understanding Home Insurance Basics Matters in California

Insurers are pulling back from California for concrete reasons: Wildfire frequency and severity have increased, reconstruction costs have risen, and catastrophic losses have exceeded what older risk models predicted.

As a result, more homeowners are being pushed onto the California FAIR Plan, the state's insurer of last resort, which provides basic fire insurance when traditional insurers decline to write a policy. Eligibility for the FAIR Plan indicates that insurers view a home as high-risk, and while it’s a better option than being uninsured, it has real limitations:

• It only provides dwelling coverage, requiring separate policies for liability and personal property

• Its premiums often run two to three times higher than traditional coverage per dollar insured

• It’s capped at $3 million for a primary residence

The FAIR Plan was intended as a temporary solution, not a long-term option.

For homeowners, the bottom line is that getting traditional insurance after rebuilding is not guaranteed, even if you had coverage before the fires. And premiums may be significantly higher. The long-term goal should be qualifying for homeowners coverage, and resilient rebuilding is one way to do that.

Your Rebuild Shapes Your Insurance Options

Your rebuilding decisions directly impact your insurance options. Homeowners who just rebuild to code risk non-renewal notices, premium increases, and being pushed to the FAIR Plan within a few years.

Homeowners who rebuild to the IBHS WPH+ standard are in a better position. Some insurers, like Mercury Insurance, have publicly said that IBHS WPH+ certified homes are "excellent risks” and that they hope to write more of them as rebuilds from the Eaton Fire increasingly choose to adopt the higher resilience standards. Other insurers remain skeptical or want to see more evidence, which is why any mitigation steps that homeowners take should be shared with insurers.

CSAA has committed to not cancelling policyholders that meet the IBHS WPH standard, and several carriers are offering premium discounts for achieving it as well. Homeowners who rebuild to the Plus standard have documented proof of mitigation to show prospective insurers, a real advantage in a tight market.

And when enough homes on a block or in a neighborhood are rebuilt to a higher standard, the risk profile of the entire area improves, which can make it easier for everyone in your neighborhood to find and maintain coverage. Wildfire mitigation should be a collective activity, so homeowners shouldn’t hesitate to discuss the topic with neighbors.

How to Get Started

We've put together resources for homeowners who want to protect their homes from future fires and strengthen their long-term insurability.

Here's where to go next:

• Why now is the best time to rebuild with resilience: rebuilding vs. retrofitting

• What insurers are looking for: guide to the Wildfire Prepared Home+ standard

• How to finance your resilient rebuild: funds, grants, and lending products

• How to choose resilient materials: non-combustible and fire-rated building materials

• Insurance for Good website: wildfire mitigation discounts from California insurers

• United Policyholders’ website: for additional recovery and preparedness support

And here are questions you should ask about insurance during the rebuild process:

For your insurance agent or carrier:

• "What coverage do I currently have during rebuilding?"

• "Will you guarantee renewal if I rebuild to the IBHS Wildfire Prepared Home Plus standard?"

• "What premium discounts do you offer for IBHS-certified homes?"

• “Should we shop my policy to see if other carriers are more likely to reward my investments in wildfire mitigation?”

• "What specific features would make my home more insurable?"

• "If I rebuild to code only, what are my realistic chances of renewal?"

For your lender:

• "Do you have programs that help finance resilient rebuilding?"

• "Can you help cover the resiliency delta between code and IBHS+ standard?"

• "What happens to my mortgage if I can't get insurance after rebuilding?"