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Home insurance used to be an afterthought in a Palo Alto purchase. Since 2022 or so, California's home insurance market has been under strain, with some insurers limiting new policies and many owners seeing large premium increases. Most of Palo Alto sits on the flat plain far from the wildland edge, which helps. The foothills are another story. Every owner also faces two big risks that a standard policy leaves out entirely: earthquake and flood.
This page explains how the pieces fit together and what state regulators reported in 2026. It is general information, not insurance, legal or financial advice. We do not recommend insurers or agents. Get quotes and coverage advice from licensed insurance professionals and check any company or agent on the California Department of Insurance website.
What a homeowners policy covers
A typical homeowners policy for a house has several parts. Condos and rentals use variations on the same idea.
| Coverage | What it pays for |
|---|---|
| Dwelling | Repairing or rebuilding the house after a covered loss |
| Other structures | Detached garages, fences and similar structures |
| Personal property | Belongings inside the home |
| Loss of use | Extra living costs while the home cannot be lived in |
| Liability | Claims if someone is hurt on your property or you damage others' property |
Fire, including wildfire, is a standard covered peril. Earthquake and flood are standard exclusions. So are wear and tear and many kinds of slow leaks.
Questions to ask about limits
- Replacement cost or actual cash value. Replacement cost pays to rebuild with similar materials. Actual cash value subtracts depreciation.
- Extended replacement cost. Some policies pay a set percentage above the dwelling limit if rebuilding costs more than expected.
- Ordinance or law coverage. Older houses rebuilt after a loss must meet current codes. This coverage helps pay for those upgrades. It matters for houses in Professorville or on the city's historic inventory. See historic home rules.
- Dwelling limit. Rebuilding costs are not the same as the sale price, which in Palo Alto is mostly land. Ask how the insurer estimated the rebuild cost.
Wildfire risk in Palo Alto
CAL FIRE released updated Fire Hazard Severity Zone maps for Palo Alto in early 2025. According to the city, areas in the Palo Alto Hills were mapped as high or very high and areas generally west of Junipero Serra Boulevard and Foothill Expressway as moderate. Most of the city east of those roads was not in a mapped zone. Our flood zones and insurance page links to the state lookup tool.
Insurers use their own risk models, not just state maps, so a house outside a mapped zone can still be priced for wildfire risk. State rules adopted under the Department of Insurance's Safer from Wildfires program require insurers to recognize certain mitigation steps, such as ember-resistant vents, a Class A roof and cleared defensible space, in their pricing. Ask each insurer which steps earn a discount and what proof it needs.
Wildfire smoke is a separate everyday concern. Our air quality guide covers it. For evacuation planning, see our emergency preparedness guide.
The California FAIR Plan
The California FAIR Plan is an insurance pool that all property insurers licensed in the state take part in. It exists to offer basic fire coverage to owners who cannot find it in the regular market. It is meant as a last resort, not a first choice.
- What it covers. The residential FAIR Plan policy focuses on fire and a few related perils such as smoke and lightning. It does not offer the full package of a standard homeowners policy.
- Filling the gaps. Many FAIR Plan policyholders add a difference in conditions policy from another insurer to cover theft, liability, water damage and other risks.
- How to apply. Through a licensed agent or broker. Ask about limits, since high-value homes may need more coverage than one policy provides.
The plan grew quickly in 2024 and 2025 as insurers pulled back. That growth slowed in 2026. The Department of Insurance reported in May that the FAIR Plan added about 16,000 residential policies in the first quarter of 2026, about 2.4 percent, compared with 35,000 to 50,000 a quarter from 2024 through September 2025. Its August 3, 2026 release reported growth of 1.9 percent in the second quarter, the lowest quarterly increase since 2022, with about 24,000 policies leaving the plan in April and May.
The state insurance market in 2026
The Department of Insurance describes its Sustainable Insurance Strategy, completed in December 2024, as a set of rule changes meant to bring insurers back to writing policies, especially in wildfire-distressed areas. In exchange, insurers can use catastrophe models and other tools in their rate filings, subject to commitments to write more coverage. As officially reported in 2026:
- By August 2026, the department said 11 insurance groups had committed to stay and grow in California under the strategy.
- In May 2026, the department cited a San Francisco Chronicle report that insurers covering about a third of California homes had requested average increases of about 6.9 percent, smaller than the double-digit requests of recent years.
- The department said more insurers were expected to file plans.
These are the regulator's own figures and descriptions. Consumer groups and some legislators have questioned parts of the strategy. The effect on any one household depends on its insurer, its address and its house. California elects a new insurance commissioner in November 2026, since Commissioner Ricardo Lara is term-limited, so policy direction could shift.
Earthquake and flood: the two big gaps
Standard policies exclude both. Owners who want coverage buy it separately.
- Earthquake. The California Earthquake Authority sells policies through participating insurers, with deductibles from 5 to 25 percent of the dwelling limit. Private insurers also offer coverage. A verified retrofit of a qualifying older house can earn a CEA discount of up to 25 percent. Our earthquake retrofit guide explains the work and the grants.
- Flood. The National Flood Insurance Program and private insurers sell flood policies. Lenders require flood coverage for federally backed loans in Special Flood Hazard Areas. New NFIP policies generally take 30 days to start.
Because the deductible is a percentage, an earthquake policy on a house with a high dwelling limit can leave a large amount uncovered. Run the numbers for your own house before deciding.
Condos, townhomes and renters
Condo owners usually carry an individual policy for the unit's interior, belongings and liability. The association's master policy covers the building and common areas. Read the CC&Rs to see where one ends and the other begins. Ask about loss assessment coverage, which helps if the association bills owners after a large claim or a deductible. Our condo and townhome guide covers association documents.
Renters insurance covers belongings, extra living costs and liability. No state law requires it, but a lease can. See our renting guide.
For buyers and owners
- Get quotes early. Shop for coverage during your contingency period, before you remove it. Our buying guide explains the timing.
- Ask about claims history. Past water or fire claims on a house can affect pricing. Ask the seller what has been claimed.
- Know your notice rights. California requires at least 75 days' notice before an insurer declines to renew a residential policy. After a declared wildfire emergency, the commissioner can bar nonrenewals for a year in affected ZIP codes.
- Budget the full cost. Your lender will require homeowners coverage and may collect it through an impound account. Add earthquake and flood quotes to see the whole picture. Our mortgage basics page explains impounds.
- Get help with disputes. The Department of Insurance consumer hotline is 800-927-4357.
Frequently asked questions
Does homeowners insurance cover wildfire in California?
A standard homeowners policy generally covers fire, including wildfire, subject to its limits and terms. The harder question in high-risk areas is whether an insurer will write or renew the policy at all. Homeowners who cannot find coverage can turn to the California FAIR Plan as a last resort.
What is the California FAIR Plan?
The FAIR Plan is an insurance pool backed by insurers licensed in California that offers basic fire coverage to property owners who cannot get it in the regular market. Its residential policy is limited, so many owners add a separate difference in conditions policy for theft, liability, water damage and other risks.
Is the California FAIR Plan still growing in 2026?
Its growth has slowed. The California Department of Insurance reported that the plan added about 16,000 residential policies in the first quarter of 2026 and grew 1.9 percent in the second quarter, the lowest quarterly increase since 2022. About 24,000 policies left the plan in April and May 2026.
How much notice must an insurer give before not renewing a home policy?
California law requires at least 75 days' written notice before an insurer declines to renew a residential property policy. After a declared wildfire emergency, the Insurance Commissioner can also bar nonrenewals for a year in ZIP codes in or next to the fire area.
Do I need earthquake insurance in Palo Alto?
No law requires it and most lenders do not. Earthquake damage is excluded from standard policies, so owners who want coverage buy a separate policy from the California Earthquake Authority through a participating insurer or from a private insurer. Deductibles are a percentage of the dwelling limit.