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How Nevada and California Are Adapting Insurance Laws in the Face of Growing Wildfire Threats

By Susan Meyer

Updated April 8, 2026

Reviewed By Beth Swanson

Edited By Bree Matheson

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Nevada's approach to wildfire coverage
California's approach to wildfire coverage
What this means for insurance

A Growing Threat

Insurance works best when risk is spread out and somewhat predictable. Wildfires don’t play by those rules. And the threat of wildfire is growing.

In the last 40 years, the average number of acres of forested land consumed by wildfires in the U.S. has increased 1,000%.^[1]Projections show that as temperatures increase, so too does the wildfire threat. An average annual 1.8-degree temperature increase would increase the median acres burned each year by 600%.^[2]

In addition to the loss of forested acres, wildfires also cause significant infrastructure loss. Wildfires are costing the U.S. economy between $394 - $893 billion annually, including the reduced real estate value and increased water infrastructure in fire-prone areas.^[3]

The losses from wildfires pose significant concerns for insurers because the losses are catastrophic and concentrated, and the risks are rising. In response, insurers are sometimes leaving high-risk markets or increasing rates sharply.

To protect consumers from unaffordable premiums or losing insurance access, some states are taking new approaches. Let's consider how two states, Nevada and California, are attempting to solve these complex issues.

Nevada's Approach: Separating Wildfire from Homeowners Insurance

Beginning January 1 of 2026, insurance companies in Nevada are permitted to remove wildfire coverage from standard homeowners policies.^[4]

This approach hasn't been done for wildfires before, but has been used in several states for other high-severity perils. For example: earthquake coverage in California or windstorm coverage in Texas. In these markets, homeowners needing protection for these excluded perils must purchase a seperate policy. Nevada's law effectively adds wildfire risk to this category.

Why Nevada Is Doing This

As discussed above, the threat of wildfires is not going away. Nevada's approach is rooted in a simple idea: Wildfire risk is so large and volatile that it can destabilize the entire homeownership market.

By taking wildfire risk out of the equation:

Insurers can keep offering standard policies (for things like theft, liability, non-fire damage)
Wildfire risk can be priced and managed independently

That said, that doesn't mean there won't be challenges.

One concern is that typically states have a FAIR Plan, as in California, or other state-backed or specialized market for excluded risks. However, Nevada doesn't currently have this to offer.

That said, if Nevada's model works to effectively stabilize its home insurance market, other western states may follow suit.

What This Means for Nevadans

Pros:

More insurers stay in the market
Base policies could become more affordable
Clearer pricing for wildfire risk

Cons:

Homeowners have to buy two policies instead of one.
Wildfire coverage could be expensive — or hard to find.
Gaps in coverage become more likely and people might be underinsured without realizing it.

California's Approach: Guaranteeing Coverage for Fire-Safe Homes

California shares both a border and a similar climate to Nevada: arid to semi-arid in many parts with hot, dry summers. Both states have a growing wildfire risk. However, California's approach to the threat is different from that of its neighbor to the east.

Instead of pulling risk out, California is trying to make coverage more available, but only if homeowners reduce risk. New legislation would require California home insurers to guarantee coverage for homeowners who take steps to reduce their wildfire risk. Additionally, it would require insurers to give policyholders at least 6 months' notice before dropping them.^[5]

Fire-hardening methods typically include things like:

Fire-resistant roofing and building materials
Cleared vegetation around the home
Ember-resistant vents and design features

It’s about reducing the chance that a wildfire turns into a total loss.

Why California Is Doing This

While California and Nevada share some of the same risk factors and insurance issues, there are reasons for California's different approach.

California has a different problem than Nevada. As insurers are leaving high-risk areas, homeowners are increasingly being pushed into the state's FAIR Plan, which is intended as a last-resort option.^[6]

The proposed California plan is that if your home meets certain fire-hardening standards and your property follows defensible space rules, then insurers would be required (or strongly incentivized) to offer you coverage and potentially at more reasonable rates.

The goal for California is to reward mitigation, keep people in the private insurance market and align incentives between homeowners and insurers.

What This Means for Californians

Pros:

A clearer path to getting (and keeping) coverage
Financial incentive to invest in safer homes
Potentially fewer long-term losses

Cons:

Upgrades can be expensive upfront
Not all homes can realistically meet the standards
Enforcement and verification can get messy

What These Laws Mean for the Future of Insurance

The new law in Nevada and the proposed legislation in California are two very different approaches to a growing threat.

Nevada is saying: the risk is too big, let's carve it out. Meanwhile, California is saying: The risk is manageable if we change our behavior.

These aren't just local experiments. They're a preview of where insurance is heading. A few trends are becoming clear.

1. All-in-one homeowners policies may not last.

We're likely to see more unbundling of risks around perils like wildfire, wind and hail.

2. Your home's features will matter more than ever.

Insurance is shifting your risk profile from not just where you live to how your home is built and maintained. As risks increase in geographic areas, having a home designed to withstand them can be pivotal.

3. More responsibility is moving to the homeowner.

Whether it's buying separate coverage (Nevada) or upgrading your home (California), the burden of risk is shifting from insurers to being shared by homeowners.

Wrapping Up

There’s no perfect fix here.

Nevada’s model could stabilize markets — but leave people exposed if they skip coverage.
California’s model could expand access — but only for those who can afford upgrades.

Both are attempts to answer the same uncomfortable question: Who should bear the cost of wildfire risk? Right now, the answer is evolving. And ultimately, it’s probably going to be shared between insurers, governments and homeowners in ways we haven’t fully sorted out yet.

Sources

Megafire. [National Geographic]
Wildfire risks caused by climate change. [Department of Ecology - State of Washington]
Wildfires are dealing a massive blow to US real estate and homeownership, congressional report finds. [CNN]
Nevada’s New Wildfire Law Signals a Shift in Property Insurance Risk Allocation. [Program Business]
Proposed California home insurance laws would guarantee coverage for fire-safe homes. [San Francisco Chronicle]
Insurers flee wildfire-prone California despite state assistance. [E&E News]

Jump to

Nevada's approach to wildfire coverage
California's approach to wildfire coverage
What this means for insurance

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