Real Estate Home Insurance

Allstate and State Farm Won’t Offer Homeowners Insurance in California—Here’s Why

The growing trend could affect more than just California residents.
Sophie Kaemmerlé Avatar
State Farm Stop Offering Homeowners Insurance to California Residents

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Insurance giants State Farm and Allstate have officially ceased to accept applications for homeowners insurance from California state residents. Allstate allegedly stopped issuing new policies in the state last year, only announcing the move this past Friday (June 2, 2023).

The announcement closely follows a similar one made by State Farm. In a statement on the company’s website issued in late May, State Farm declared that the new policy would officially take effect on May 27, 2023, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market” as the main drivers behind the shocking decision.

As the first- and the fourth-largest insurance providers in the state, respectively, many homeowners looking for insurance have been left with fewer options. In addition to homeowners insurance, Allstate has stopped selling condo and commercial insurance policies in California. The company also cited worsening climate conditions and state regulations that drive up building costs as the main causes. Current policyholders with both companies remain unaffected for the time being.

Is a Lack of Insurance Options a Growing Trend?

While the move isn’t unprecedented (Allstate stopped issuing new policies in 1994 and 2007, resuming operations soon after both times), the growing risk of catastrophe, fueled by climate change, the frequency of natural disasters, and the widening breadth of high-risk areas may cause other insurance companies to follow suit. Some risk ceasing operations in the state altogether in order to slow the increase of insurance rates for current customers across the country—and avoid going out of business altogether.

California isn’t the only state that has seen fleeing insurance providers: Florida, Texas, and others have seen similar shifts—but few as widespread and consequential as these latest developments.

Good Alternatives to Allstate and State Farm for California Residents

California residents may not be able to choose State Farm or Allstate for their homeowners insurance needs, but there are still some top-tier insurance companies for them to choose from, such as Liberty Mutual. While it’s uncertain which companies will continue to operate in high-risk states such as California, homeowners have a last resort: the FAIR plan, which offers temporary basic property coverage. As of 2022, there are over 272,846 FAIR plan policies—an amount that has doubled since 2018.

This is a developing story.