Californians rocked by devastating wildfires that caused $250B in losses wonder whether they’ll be able to keep their home insurance as State Farm looks to hike property insurance rates 17%

State Farm’s case for raising premiums

State Farm is currently the largest property insurance provider in California, with close to three million active policies that account for 20% of the state’s homeowners market.

In February 2025, the insurer requested approval on a 22% rate hike for homeowners policies in California — since then, the firm has lowered its requested increase to 17%. State Farm is also requesting a 38% increase on rental-dwelling policies, which provide landlords with coverage, as well as a 15% increase on renters insurance.

Requiring legislative approval in order to raise rates, State Farm is aiming to convince lawmakers that the price hike is necessary after the insurer had already spent $2.75 billion in California wildfire claims, and expects to pay out around $7.6 billion in total. The California Department of Insurance supports State Farm's request, although some consumer watchdogs have expressed concerns.

Since State Farm's California subsidiary and its AA credit rating were recently placed on a “CreditWatch Negative” by S&P Global, the insurer's claims of potential financial disaster may be valid. One of the attornies for the California Department of Insurance even compared the situation to the Titanic, saying there’s still time to turn the ship around despite the iceberg being within sight.

“If we don’t, three million Californians are going into the water, and there are not enough lifeboats,” attorney Nikki McKennedy shared with CNBC.

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California's insurance market is in trouble

Unfortunately, concerns over State Farm’s financial troubles are just the tip of the iceberg when it comes to California’s insurance market as a whole. As CNBC reports, economist David Appel made it clear during State Farm’s administrative hearing that the insurance market in California, as it is now, is unsustainable.

Ricardo Lara, the state’s insurance commissioner, has reportedly been reluctant to approve rate hikes for both auto and homeowners insurance, leaving insurers to pay out more than they collect. This has led many insurance companies to stop offering policies to California residents — including State Farm, which has not written a new homeowners policy in the state since May 2023.

Allstate, American National, Farmers Insurance, Nationwide and Travelers are just a few of the many other insurance companies that have either scaled back or have completely stopped selling home and auto insurance policies in California.

The good news is Representative Adam Schiff (D-Calif.) has introduced legislation that aims to fix this dire situation.

One proposed law, the Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act, would “create a federal catastrophic reinsurance program to insulate consumers from unrestrained cost increases by offering insurers a transparent, fairly priced public reinsurance alternative for the worst climate-driven catastrophes.”

Schiff has also proposed new tax breaks for California homeowners who take steps to protect their homes from disaster, which could reduce the catastrophic damage from adverse weather events.

Unfortunately, with Republicans holding the majority of seats in the U.S. House of Representatives, the likelihood of this legislation getting passed under the Trump Administration is low, as both programs would be costly.

Without a solution at the federal level, California homeowners could soon receive new rate increases from State Farm. And as homeowners insurance options in the state continue to dwindle, many Californians who may struggle with the upcoming cost of insurance may just be grateful for whatever coverage they can get.