The risk of having your home damaged or destroyed by a wildfire is increasing, according to a new report. As a result, homeowners are facing rising insurance costs, reconstruction costs or even no insurance coverage after devastating wildfires.
Cotality, a data research company, issues yearly wildfire risk reports assessing the state of the wildfire insurance industry and the risk of damaging wildfires for certain parts of the United States.
They found that more than 2.6 million homes across 14 states in the West face a moderate or greater risk of wildfires, with nearly half of the homes at very high wildfire risk.
Those homes would cost $1.3 trillion to replace if they were destroyed by fire, according to Cotality.
Of the homes under a moderate or higher threat of wildfires, more than 1.2 million of them are in California.
The study also breaks down the wildfire risk by metro areas. Cotality reported that eight of the top 15 metro areas with the most homes at moderate risk for wildfire are in California, with the Los Angeles area holding the top spot.
Other metro areas, such as Austin, Texas; San Antonio, Texas; Denver, Colorado; Colorado Springs, Colorado; Bend, Oregon, and Flagstaff, Arizona, round out Cotality's top 15 metro areas with the most homes at moderate or greater wildfire risk.
A 2025 report from the Treasury Department examined insurance data trends from 330 insurers, covering more than 246 million homeowners insurance policies across the country from 2018 to 2022.
The report found that the cost of homeowners insurance has, on average, increased more than 8% faster than the rate of inflation during that period, with some ZIP codes having a larger increase in premium costs than the national average.
“While it’s far from clear what the exact financial costs of this disaster will be, it is a stark reminder of the impacts of the growing magnitude of natural disasters on the U.S. economy,” said Janet Yellen, who served as the Treasury secretary under President Joe Biden.
The report also found that insurers’ costs from 2018 through 2022 were higher in areas with a greater risk of expected losses from natural disasters, with an increasing frequency and severity of claims over the period.
“Moreover, this disaster does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage -- from severe storms in the Great Plains to hurricanes in the Southeast,” Yellen said.
In another report on home affordability, Cotality found that material costs have increased amid increasing demands for construction materials. The report found that the prices of reconstruction materials have spiked anywhere from 4% to 20% after natural disasters, including wildfires.
Due to the increasing frequency and intensity of wildfires and other natural disasters, as well as increasing costs to insure and rebuild homes, Cotality found that private insurers are reducing their coverage and raising premiums in wildfire-prone areas in the West.
In California, a decrease in available wildfire insurance options and the increased cost of policies are driving more Golden State homeowners to the California Fair Access to Insurance Requirements Plan (FAIR Plan), the state's last resort for providing basic property insurance to homeowners who do not have access to coverage from private insurers.
The California FAIR Plan reports that it had more than 590,000 dwelling and commercial policies in force in June 2025, more than double the number of policies it covered back in September 2023.
The insurance squeeze is not just limited to California. The Colorado Department of Regulatory Agencies released an insurance industry report in 2023 highlighting that fewer policies were issued by small to medium-sized insurers, while the top five insurance companies -- Allstate, Sate Farm, Liberty Mutual, USAA and American Family -- have slowed the number of new policies they’ve sold since 2020.
The Rocky Mountain Insurance Association also reported that homeowner premiums have increased on average by almost 58% from 2018 to 2023, with 2022 seeing a 40-year high for inflation for homeowners insurance.
Due to the increasing frequency and severity of wildfires and other natural disasters, private insurers are reducing their coverage and raising premiums in wildfire-prone areas in the West.
In California, a decrease in available wildfire insurance options and the increased cost of policies are driving more Golden State homeowners to the California Fair Access to Insurance Requirements Plan (FAIR Plan), the state's last resort for providing basic property insurance to homeowners who do not have access to coverage from private insurers.
The California FAIR Plan reports that it had more than 590,000 dwelling and commercial policies in force in June 2025, more than double the number of policies it covered back in September 2023.
The insurance squeeze is not just limited to California. The Colorado Department of Regulatory Agencies released an insurance industry report in 2023 highlighting that fewer policies were issued by small to medium-sized insurers, while the top five insurance companies -- Allstate, State Farm, Liberty Mutual, USAA and American Family -- have slowed the number of new policies they’ve sold since 2020.
Overall, the increasing wildfire risk and climate change are leading to higher insurance costs, fewer coverage options, and greater financial strain on homeowners in wildfire-prone areas. The situation remains dynamic as insurers adjust their policies to the evolving threat landscape.