State Farm General, the largest provider of Fire insurance in California, has requested an emergency rate hike of 22% for homeowners following one of the most expensive natural disasters in U.S. history. The company has already paid out over $1 billion in claims, with more expected in the coming months.
In a letter to the California Department of Insurance (CDI), State Farm argues that these increases are necessary to maintain financial stability and continue offering coverage in wildfire prone areas. “This request will help avert a dire situation for our customers,” the company stated.
California has an insurance crisis, as residents already pay some of the highest home insurance premiums in the country, and major insurers have pulled back from the market in recent years due to rising wildfire risks. With this latest request, homeowners could face even higher costs and fewer coverage options.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The growing financial toll of wildfires in California
The recent wildfires in California have caused an estimated $135 billion to $150 billion in total damage and economic losses, according to AccuWeather. The Los Angeles region alone saw 12,000 homes destroyed, adding to the growing financial strain on insurers.
As of February 1, State Farm General has received more than 8,700 claims, already paying out over $1 billion, with additional claims expected. In a statement, the company emphasized that rate increases are necessary to cover future claims, given the growing risks in the state.
However, the California Department of Insurance has raised concerns about State Farm’s financial situation, questioning the justification for these rate hikes. "To protect millions of California consumers and the integrity of our residential property insurance market, the Department will respond with urgency and transparency to recommend a course of action for Commissioner Ricardo Lara," CDI stated.
Currently, there is no proposed timeline for approval or denial of State Farm’s request.
State Farm seeks sharp rate increases across California
State Farm is proposing substantial rate hikes across different property types, including:
- 22% increase for homeowners
- 15% increase for renters and condo owners
- Up to 38% increase for rental dwellings
The company cites rising wildfire risks and mounting financial losses as justification, claiming these increases are crucial to offset claims and ensure long-term stability.
However, consumer advocacy groups like Consumer Watchdog, have strongly opposed the request. Critics argue that homeowners should not bear the burden of corporate losses, especially when State Farm’s parent company holds $135 billion in reserves. They also point to State Farm’s $1.4 billion in profits from 2020 to 2022, questioning the timing and necessity of such a drastic hike.
State Farm has pursued similar increases before. A previous 20% rate hike took effect in March 2024. In June 2023, the company applied for a 30% rate increase totaling $1.3 billion, arguing that California policyholders — not its parent company — should help shore up its finances.
Other insurers, including Allstate and Farmers, have also sought double-digit rate increases or reduced their presence in California, citing similar financial pressures.
How homeowners can navigate rising insurance costs
With rising insurance costs and fewer options, California homeowners must explore alternatives to protect their properties. Some may turn to the California FAIR Plan, a last-resort insurance program for high-risk areas, though it often comes with higher premiums and limited coverage. Others might try bundled policies or regional insurers that still operate in wildfire-prone areas.
Another way to manage rising costs is through mitigation efforts to protect your home from natural disaster, which may make homeowners eligible for discounts or expanded coverage. For wildfires, this includes fire-resistant roofing, defensible space around properties and improved sprinkler systems. Some insurers, including State Farm, offer incentives for wildfire-resistant improvements but availability and savings vary.
Use our tool below, in partnership with Bankrate, to compare today’s home insurance rates:
State Farm’s proposed rate hikes underscore the worsening crisis in California’s home insurance market. Insurers face mounting wildfire-related losses, and homeowners struggle with rising costs. The outcome of State Farm’s emergency request will set a precedent for future rate increases and could influence how other insurers approach coverage in high-risk regions.
Beyond California, this issue has broader implications for other disaster-prone states, where hurricanes, floods and wildfires are driving higher insurance costs and insurer withdrawals. As regulators weigh consumer protection against insurer solvency, the uncertainty surrounding State Farm’s request leaves many homeowners wondering just how much higher premiums can go before coverage becomes unattainable.
Related content
-
Energy-Efficiency Credits — Get ’Em While You CanGreen energy-efficiency credits are on the chopping block. These tax credits can be valuable, but you should upgrade your home sooner rather than later.
-
Retire in Japan: It Ain’t Easy, Unless You’re Very SpecialPeople find relocating to Japan worth the effort, as long as you can jump through those administrative hoops and be open to a flexible view of “retirement.”
-
5 Father's Day Gift Ideas That Also Make Good Long-Term InvestmentsTies are tired. Try these growth-potential gifts instead.
-
My First $1 Million: Retirement Coach, 69, Sammamish, Wash.Ever wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
CVS Is Closing More Stores in 2025: What It Means for YouAs CVS Health continues its restructuring plan, additional store closures raise questions about access to pharmacy services and the future of retail healthcare.
-
The United and JetBlue Partnership: Everything We Know About Blue Sky So FarBlue Sky, the United and JetBlue partnership just announced, will give frequent fliers more ways to earn and use miles. Here's what you need to know.
-
8 Changes to HSAs in the One Big Beautiful Bill Add up for Retirement SaversHSAs are getting a glow-up in the pending tax bill. Those 55+ and workers enrolled in Medicare Part A will have more opportunity to save for medical costs in retirement.
-
Farewell to the Penny: US Treasury Ends Production of One Cent CoinAfter more than 200 years, the U.S. bids adieu to the penny, citing high production costs and shifting economic practices.
-
How to Appeal a Health Insurance DenialIf your insurer refuses to pay for a treatment or procedure that you believe should be covered, use our guide to appeal.
-
Five Divorce Settlement Blind Spots: An Expert's Guide to What You Can't Afford to MissEven the best lawyers can miss tax and other financial considerations when drafting complex divorce settlements, so specialist advice is vital from the outset.
