Wildfires in the West Drive Up Insurance Costs, Leave Homeowners Struggling

 

The risk of having your home damaged or destroyed by a wildfire is increasing, according to a new report. As a result, homeowners are facing rising insurance costs, reconstruction costs or even no insurance coverage after devastating wildfires.

Cotality, a data research company, issues yearly wildfire risk reports assessing the state of the wildfire insurance industry and the risk of damaging wildfires for certain parts of the United States.

They found that more than 2.6 million homes across 14 states in the West face a moderate or greater risk of wildfires, with nearly half of the homes at very high wildfire risk. 

Those homes would cost $1.3 trillion to replace if they were destroyed by fire, according to Cotality.

Of the homes under a moderate or higher threat of wildfires, more than 1.2 million of them are in California.

The study also breaks down the wildfire risk by metro areas. Cotality reported that eight of the top 15 metro areas with the most homes at moderate risk for wildfire are in California, with the Los Angeles area holding the top spot.

Other metro areas, such as Austin, Texas; San Antonio, Texas; Denver, Colorado; Colorado Springs, Colorado; Bend, Oregon, and Flagstaff, Arizona, round out Cotality's top 15 metro areas with the most homes at moderate or greater wildfire risk.

Insurance is becoming more expensive with fewer options

A 2025 report from the Treasury Department examined insurance data trends from 330 insurers, covering more than 246 million homeowners insurance policies across the country from 2018 to 2022.

The report found that the cost of homeowners insurance has, on average, increased more than 8% faster than the rate of inflation during that period, with some ZIP codes having a larger increase in premium costs than the national average.

“While it’s far from clear what the exact financial costs of this disaster will be, it is a stark reminder of the impacts of the growing magnitude of natural disasters on the U.S. economy,” said Janet Yellen, who served as the Treasury secretary under President Joe Biden.

The report also found that insurers’ costs in 2018 through 2022 were higher in areas with a greater risk of expected losses from natural disasters, with an increasing frequency and severity of claims over the period.

“Moreover, this disaster does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage -- from severe storms in the Great Plains to hurricanes in the Southeast,” Yellen said.

In another report on home affordability, Cotality found that material costs have increased amid increasing demands for construction materials. The report found that the prices of reconstruction materials have spiked anywhere from 4% to 20% after natural disasters, including wildfires.

Due to the increasing frequency and intensity of wildfires and other natural disasters, as well as increasing costs to insure and rebuild homes, Cotality found that private insurers are reducing their coverage and raising premiums in wildfire-prone areas in the West.

In California, a decrease in available wildfire insurance options and the increased cost of policies are driving more Golden State homeowners to the California Fair Access to Insurance Requirements Plan (FAIR Plan), the state's last resort for providing basic property insurance to homeowners who do not have access to coverage from private insurers.

The California FAIR Plan reports that it had more than 590,000 dwelling and commercial policies in force in June 2025, more than double the number of policies it covered back in September 2023.

The insurance squeeze is not just limited to California. The Colorado Department of Regulatory Agencies released an insurance industry report in 2023 highlighting that fewer policies were issued by small to medium-sized insurers, while the top five insurance companies -- Allstate, State Farm, Liberty Mutual, USAA and American Family -- have slowed the number of new policies they’ve sold since 2020.

The Rocky Mountain Insurance Association also reported that homeowner premiums have increased on average by almost 58% from 2018 to 2023, with 2022 seeing a 40-year high for inflation for homeowners insurance.

Oregon is another state feeling the strain of costlier and harder to obtain insurance policies, with Cotality finding that major insurers have begun to pull back homeowner insurance coverage in parts of Oregon.

Why is wildfire risk increasing?

The increasing wildfire risk has a combination of complex factors, from larger weather patterns to local climate and land usage.

"There are many contributing factors to the increasing threat of wildfires, including where and how we build. Building with wildfires in mind and introducing mitigation measures for where we have already built is one of the critical conversations we need to be having right now," said Tom Larsen, Cotality's assistant VP of product marketing for insurance solutions.

A significant contributing factor, though, to the increasing wildfire risk is a changing climate.

According to Climate Central, wildfire seasons are becoming longer and more intense with more frequent and more extended periods of warm and dry weather, especially out West.

A 2024 study from Nature Ecology & Evolution also found that individual fires are increasing in frequency and intensity across the country due to human-induced climate change.

"Wildfires are complex, fast-moving, dangerous -- and a growing threat to homes and communities. Understanding the level of risk will help equip homeowners and insurers to take preventative action that can save properties and lives," Larsen said.

What does it mean for you?

Increasing wildfire risk, higher premiums and fewer policy options mean that owning a home in a wildfire-prone area is likely to keep getting more expensive. And even those who don't own a home are facing risks from fires.

And the increasing wildfire risk is not only making it more expensive to own and protect a home, but also negatively impacting everyone's health, data show. A recent report from the Air Quality Life Index reveals that air quality levels have decreased to levels not seen since 2011 for the U.S. and since 1998 in Canada due to particulate pollution from wildfire smoke.

The report also highlights that particulate pollution from wildfire smoke was the most significant external threat to human life expectancy in 2023, which has lowered the average global human life expectancy by as much as 1.9 years.

It concludes that wildfire smoke's impact on life expectancy is "more than four times that of alcohol use, five times that of transport injuries or unsafe water, sanitation, and handwashing, and more than six times that of HIV/AIDS."