California homeowners are set to face another sharp increase in insurance costs, as Allstate, the state’s sixth-largest insurer, has been granted approval from the California Department of Insurance to raise premiums by 34.1% in wildfire-prone regions. This hike, which impacts around 350,000 policyholders, will take effect in November.
This is the most significant rate increase from a major insurer in California in the past three years. The adjustment is attributed to a combination of rising home values, increasing repair costs, and the growing frequency of severe weather events.
A Growing Property Insurance Crisis
The state continues to grapple with a property insurance crisis, particularly in areas at high risk for wildfires and other natural disasters. Earlier this year, State Farm, California’s largest insurer, sought approval for rate increases as well. The company is requesting a 30% rise in homeowners’ insurance rates, a 36% increase for condo owners, and a steep 52% hike for renters.
Allstate’s move to stop issuing new homeowners’ policies in California last year, alongside these requests for higher rates, underscores the mounting challenges insurers face in managing increasing costs and risks. For homeowners, the ability to secure affordable insurance coverage is becoming more difficult.
Impact on Housing Affordability
These escalating insurance premiums are adding to the financial strain on California homeowners and renters, who are already grappling with the state’s housing affordability crisis. As insurance costs rise, maintaining affordable living conditions is becoming even more of a challenge in one of the most expensive housing markets in the country.