Fire Risk: Why Everyone Is Talking About Wildfire Insurance
Prism Specialties
Increased forest fire risk in parts of the US has changed how insurers cover property losses and may change where homeowners live in the decades to come.
Increased forest fire risk in parts of the US has changed how insurers cover property losses and may change where homeowners live in the decades to come.
Several western and southern states face longer, drier, and more severe fire seasons than ever. As forest fire risk increases, homeowners face tough decisions about the viability of living in fire-prone areas.
The dramatic rise in wildfire insurance claims has also contributed to a seismic shift in homeowners and wildfire insurance policy offerings in California, Washington, and other parts of the US.
It’s a complicated situation for property owners, insurance companies, and the state and federal policymakers charged with regulating the $233 billion insurance industry.
Here’s what to know about wildfire insurance coverage, shifting industry coverage, and how individuals can protect their property in high-risk areas.
There are over 4.5 million US homes located in areas deemed at high or extreme risk of wildfire. With hotter, drier conditions increasing, today’s wildfire and homeowners insurance industry faces serious challenges.
Between 1964 and 1990, US wildfire losses averaged less than $100 million annually.
In 2023, a year marked by historic fires in Hawaii, California, and Washington, US insurance companies paid out 148 times that: over $14.8 billion for wildfire losses just through September.
Total cost estimates put the economic burden of wildfires even higher, with conservative estimates of $394 billion accounting for related expenses, including:
Wildfire events and other losses led to a ten-year high in insurance losses in 2023. The property and casualty insurance industry registered $38 billion in underwriting losses and another $65 billion in catastrophe payouts. The pace and value of claims have forced insurers to make dramatic changes.
State Farm announced it was leaving the California home insurance market for good, and would increase premiums in several other fire-prone states. Across all insurance companies, non-renewal rates increased by 61% in high-risk zip codes in the state.
Related: How to Prepare for a Natural Disaster
A traditional homeowners insurance policy might cover damage from wildfires, but not always. Properties in fire-prone areas, including California, usually require a separate wildfire insurance rider. Many owners in risky areas face fewer options, higher premiums, or both.
Insurers may also choose not to renew coverage to existing customers. These non-renewals are a financial decision for loss-burdened insurers trying to stay afloat but they’re leaving homeowners exposed and responsible to pay for wildfire damage.
Many property owners are circling the wagons with proactive, on-the-ground measures to mitigate wildfire risk at home. In some cases, insurers may offer discounts to properties with documented mitigation efforts; speak with the relevant insurance professional about these programs and resources.
Whether you’re ready to make a substantial investment in risk mitigation or want to understand your coverage, there are steps you can take to prepare for the next fire season:
Our experienced restoration specialists have witnessed the increase in wildfire damage firsthand. Our teams have helped restore fire-damaged personal belongings after a loss event and supported claim adjusters to serve clients when they need it most.
When insurers and contractors need specialty restoration services, Prism Specialties has proprietary expertise and national resources to quickly get households and businesses back to normal.
With locations across the country, a Prism Specialties team is nearby and ready to help. Find a location near you or call (888) 826-9429 today to learn more.
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