California’s Recent Insurance Bills: Why They Fall Short for Homeowners

Homeowners and buyers across Southern California are struggling to secure basic fire insurance, being denied coverage, losing out on deals, and facing lenders demanding insurance requirements or limits the buyer cannot obtain. In an attempt to help homeowners and buyers, and in response to the 2025 Palisades and Eaton fires, the state legislature introduced new insurance‑related bills that aimed to address these issues. These wildfires displaced thousands and exposed just how fragile California’s insurance market has become. While lawmakers have framed the bills as meaningful relief, the practical impact is limited.

For many people trying to purchase or keep a home in high‑risk areas, the legislation does not address the real problem: carriers are unwilling to write policies in entire zip codes, and are leaving the state. This limits the number of insurance providers which makes accessing fire insurance coverage more difficult than ever.

Volume 1 of our 3 part series focuses on the three bills most frequently discussed in the recent legislative session movement: AB 1, AB 226, and SB 525. Each proposes improvements on paper, but none resolve the core issue facing today’s buyers and homeowners. Insurance availability has become a major obstacle to purchasing, financing, and maintaining a home in Southern California. Even buyers who meet lender requirements and complete mitigation steps are finding that carriers will not quote, bind, or renew policies. These bills offer helpful adjustments, but they are far from fixing the structural failures of California’s fire‑insurance market.

AB 1: Wildfire Risk Regulations and Mitigation Requirements

AB 1 directs the Department of Insurance to update and expand wildfire‑mitigation standards statewide. Some of these standards relate to property‑level hardening and community‑level mitigation planning. Although this may eventually support premium relief, the bill does not address the primary barrier for buyers.

The problem is not only high premiums as insurers are declining to write new policies or renew policies in many San Diego area zip codes, regardless of the mitigation steps taken by the homeowner. A homeowner may comply with every recommended home hardening measure yet still be denied coverage. AB 1 improves regulatory guidance, but it does not require carriers to issue new policies, even when mitigation work is completed.

AB 226: Bonding Authority for the FAIR Plan

The FAIR Plan provides basic fire insurance coverage for high-risk properties when traditional insurance companies will not.  AB 226 authorizes the FAIR Plan to use state bonding to stabilize its finances after major loss events such as the Palisades and Eaton fires.

This measure responds to the pressure placed on the FAIR Plan as claims increased and its reserves were strained. Expanding bonding authority is sensible, but it does not expand coverage limits or meaningfully broaden available policy types. FAIR Plan policies remain limited in scope and are often insufficient for homeowners with moderate or higher replacement costs. Buyers relying on the FAIR Plan still face the burden of trying to secure costly supplemental coverage from a limited pool of high-risk insurers.

SB 525: Manufactured Home Coverage Parity

SB 525 requires that manufactured and mobile homes be insured under the same terms available to site‑built homes under the FAIR Plan. This corrects an inequity but does not change the broader availability crisis. While coverage parity is valuable, the FAIR Plan remains a limited and last‑resort product. Many policyholders still face partial coverage, reduced protections, and uncertain renewals year to year. They are also potentially faced with the additional financial burden of covering expenses beyond what insurance covers in the event of a loss.

Why These Bills Are Not the Long‑Term Solution Homeowners Need

Although these measures represent an effort to respond to mounting public pressure, they do not solve the issues that matter most during a real estate transaction. For buyers who must secure fire insurance to satisfy lender requirements or for their own protection, the core barrier is not only cost but availability. In many high‑risk zones, lenders are increasingly requiring excess coverage, endorsements, or supplemental private policies that no carrier will issue at a reasonable rate.

Some buyers are now facing scenarios where partial self‑insurance becomes the only option available, even though it is not a viable underwriting solution for most conventional loans. These conditions have made it significantly harder for buyers to close transactions and for homeowners to maintain stable coverage.

The recent legislative roll-outs function more like an administrative patch than a structural reform. Premium volatility continues, carriers are still restricting new business and leaving the state, and homeowners remain unsure as to what their policies truly cover. These gaps leave buyers and homeowners confused about their options and sellers vulnerable to failed escrows when insurance cannot be found in time.

In Upcoming Volumes

This volume sets the foundation for a more realistic review of California’s insurance reforms. The next volumes will cover the issues that are already affecting real estate transactions throughout San Diego County.

Volume 2 will break down the newest C.A.R. wildfire‑disclosure forms, their practical effect in a transaction, and the misunderstandings occurring between buyers, sellers, agents and government entities.

Volume 3 will examine insurer withdrawals from the California market, increased lender scrutiny during underwriting, and the growing trend of buyers being required to partially self‑insure to secure financing.

Sources

1. Law360 summary of new insurance bills affecting Los Angeles fire survivors
2. California legislative summaries for AB 1, AB 226, and SB 525
3. Post‑Palisades and Eaton wildfire reporting on FAIR Plan strain and market instability

Need Legal Advice?

If you’re a landlord or a tenant impacted by fires in San Diego, contact Hoffman Forde today at (619) 614-2170 or intake@hoffmanforde.com.

Disclaimer

The information in this post is considered attorney advertising under applicable California law. The contents of this post are for informational purposes only and do not constitute legal advice. The information may be incomplete or out of date. No representations, testimonials, or endorsements on this website constitute a guarantee, warranty, or prediction regarding the outcome of any legal matter.

Written By

Hoffman Forde, Attorneys at Law