Burned and uninsured: Wildfires put California's real estate market in trouble

Los Angeles
CNN
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After the 2018 Camp Fire – the worst wildfire in California history – devastated Michael and Kristy Daneau's Paradise home, the couple and their four daughters were forced to move 30 miles away to find an affordable home.

They moved to Cohasset to buy a home with the money they received from their insurance claim, as well as their share of an $11 billion settlement Pacific Gas & Electric (PG&E) made with insurance companies for the fires, which were caused by equipment failure.

Six years later, the family is experiencing déjà vu: Their new home in the rocky region of Northern California recently burned to the ground in the 2024 Park Fire, the fourth largest fire in the state's history.

But this time, the Daneaus lack the safety net of insurance that could help them rebuild their lives.

When they moved to Cohasset, every company they contacted refused to give them home insurance, saying they could protect themselves from wildfires. When they finally found an insurer that would offer them insurance, they couldn't afford it. It was too expensive – they were uninsured in a state prone to natural disasters. And now they're left with basically nothing.

The climate crisis, which is particularly acute in California, is causing a rapid increase in the intensity and frequency of wildfires and the number of homes destroyed by them. This has made home insurance increasingly unaffordable or even inaccessible – and is putting more and more people in the same situation as the Daneaus.

“We're literally back to square one, like starting over in life. It's numbing, honestly,” Michael said. He and his family are relying on what little they've saved and hope to raise $30,000 through donations on their GoFundMe page to “find a place to live, even if it's just to rent,” he said.

Last year alone, the Insurance Information Institute recorded $80 billion in insured losses caused by natural disasters in the U.S. The Daneaus' home was one of about 19,000 structures destroyed in the 2018 Camp Fire, so insurers are quickly pulling out of states like California to avoid such costs.

Since 2015, the California Department of Insurance has kept records of the number of policies renewed and canceled in high-fire risk areas, which make up more than a quarter of the state. Through the most recent report, released in 2022, the department has seen an increase in canceled policies, with the largest increase occurring in 2019 at 10%.

When policies are not canceled outright, insurance premiums sometimes rise exorbitantly. California's largest insurer, State Farm, last month asked for a 30 percent premium increase on its homeowners insurance. This came a year after State Farm stopped selling insurance on new homes entirely, citing wildfire risks. State Farm did not respond to a request for comment from CNN.

The combination of premium increases, non-renewals and policy cancellations forced many California homeowners to turn to the state's stopgap solution: the California FAIR Plan, a private association created by the state to serve as an insurer of last resort for those denied a policy.

The California FAIR Plan was created in 1968 to provide an insurance option for those who cannot afford insurance in the traditional market. However, what was introduced as a temporary solution has now become only Solution for many.

After all the insurance companies denied the Daneaus' coverage for the house they moved into in Cohasset, the couple explored their insurance options through the California FAIR Plan. What was initially an affordable solution became far too expensive in 2022. They told CNN the plan would have cost them $12,000, with a $7,000 down payment and a $4,000 payment the next month.

“The first year it seemed OK…the second year it went up so much that it hurt a little bit. In the last few years it was so out of reach that we basically had to make a mortgage payment to afford the California FAIR Plan, plus the extra insurance that you need to go with it,” said Michael Daneau.

Since 2019, the California FAIR Plan has seen a 164% increase in policies, including a 27% increase last year alone, an indication of how many state residents lack access to private insurance.

Last year, California Insurance Commissioner Ricardo Lara reached an agreement with insurers that aims to cover about 85% of properties in high-risk areas, but the commissioner does not have the authority to force insurers to expand coverage.

As homeowners continue to explore insurance options, the question of what's next has become important for homeowners and insurers alike. Across the Golden State, both groups are exploring ways to make California more resilient to wildfires.

The Insurance Institute for Business & Home Safety (IBHS), an insurer-supported nonprofit research organization, has led both advocacy and research efforts to increase infrastructure resilience.

One result of this is the Wildfire Prepared program, which classifies homes as wildfire-resistant after evaluating both retrofitted and newly built homes.

The IBHS's assessment standards include components such as wildfire-safe patios, improved windows and doors, and the removal of back-to-back fencing, according to Steve Hawks, IBHS senior director of wildfire.

Following the 2018 Woolsey Fire, which destroyed 1,643 structures in the Santa Monica Mountains, the Los Angeles Emergency Preparedness Foundation (LAEPF), a local nonprofit organization, mobilized to educate homeowners about the need to secure their homes.

During a door-to-door campaign, they reached Angela Wilson, a 37-year-old homeowner in Malibu who has taken several steps over the past year in partnership with LAEPF to make her home more resilient to wildfires.

In addition to making structural changes such as locking her doors and installing metal grilles on the vents, the avid gardener has also made the difficult decision to part with her flower beds and lush gardens.

“[My insurance plan] was not canceled, but my insurance did raise the premiums quite a bit,” she said. Wilson has not completed the program yet, but hopes it will help her eventually lower her insurance costs.

“Some insurers have begun to provide a list of changes homeowners must make to keep their insurance or maybe even get a discount on premiums,” said Brent Woodworth, chairman and CEO of LAEPF. But he cautioned that there is no guarantee and homeowners like the Daneaus are grappling with uncertainty.

“I am personally so numb that I just cannot comprehend where we are going and what we are going to do. How do we move forward from here when we know that we have built a beautiful life for ourselves and our children and now we have literally nothing,” said Michael Daneau.

CNN's Camila Bernal and Sarah Moon contributed reporting.