The risk of home damage from wildfires is on the rise, according to a recent report. Homeowners are facing increased insurance costs, higher reconstruction expenses, and in some cases, a lack of insurance coverage following devastating wildfires.

Cotality, a data research firm, releases annual reports assessing wildfire risks and the insurance industry's response. Their latest findings indicate that over 2.6 million homes across 14 Western states are at moderate or greater risk of wildfires. Nearly half of these homes are classified as being at very high risk. If destroyed, these homes would cost approximately $1.3 trillion to replace.

California is particularly affected, with more than 1.2 million homes facing moderate or higher wildfire threats. The report also highlights metro areas with significant wildfire risks. Eight of the top 15 areas with the most homes at moderate risk are in California, with the Los Angeles area leading the list. Other cities, including Austin and San Antonio in Texas, Denver and Colorado Springs in Colorado, Bend in Oregon, and Flagstaff in Arizona, also rank among the top 15.

A 2025 report from the Treasury Department analyzed insurance data from 330 insurers, covering over 246 million homeowners insurance policies from 2018 to 2022. It revealed that homeowners insurance costs have risen more than 8% faster than inflation during this period. Some ZIP codes experienced even larger increases. Janet Yellen, former Treasury Secretary, noted, "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."

The report also indicated that insurers' costs were higher in areas with greater risks of natural disasters, leading to more frequent and severe claims. Yellen added, "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."

Cotality's findings also show that reconstruction material costs have surged between 4% and 20% following natural disasters, including wildfires. As wildfires and other natural disasters become more frequent and intense, private insurers are reducing coverage and increasing premiums in high-risk areas. In California, many homeowners are turning to the California Fair Access to Insurance Requirements Plan (FAIR Plan) for basic property insurance, as private options dwindle. The FAIR Plan reported over 590,000 policies in force as of June 2025, more than double the number from September 2023.

The insurance challenges extend beyond California. A 2023 report from the Colorado Department of Regulatory Agencies noted a decline in policies issued by smaller insurers, while major companies like Allstate and State Farm have slowed new policy sales since 2020. The Rocky Mountain Insurance Association reported that homeowner premiums increased by nearly 58% from 2018 to 2023, with 2022 marking a 40-year high for inflation in homeowners insurance.

Oregon is also experiencing difficulties, with major insurers pulling back coverage in certain areas. The increasing wildfire risk stems from various factors, including climate change and land use practices. Tom Larsen, Cotality's assistant VP of product marketing for insurance solutions, stated, "There are many contributing factors to the increasing threat of wildfires, including where and how we build."

Climate Central reports that wildfire seasons are becoming longer and more intense, with more frequent warm and dry weather, particularly in the West. A 2024 study found that individual fires are increasing in frequency and intensity due to human-induced climate change. Larsen emphasized the importance of understanding wildfire risks, saying, "Understanding the level of risk will help equip homeowners and insurers to take preventative action that can save properties and lives."

The implications of rising wildfire risks extend beyond homeowners. A recent report from the Air Quality Life Index indicates that air quality in the U.S. has deteriorated to levels not seen since 2011, largely due to wildfire smoke. This pollution has significantly impacted human life expectancy, lowering it by as much as 1.9 years globally. The report highlights that wildfire smoke poses a greater threat to life expectancy than alcohol use, transport injuries, unsafe water, and even HIV/AIDS.