If you're a California Veteran thinking about buying a home, you're facing a challenge that Veterans in most other states don't have to worry about: finding affordable homeowners insurance in areas threatened by wildfires. This insurance hurdle can make or break your ability to close on a home with a VA loan.
While VA loans themselves don't require specific insurance, the lenders who approve these mortgages do. They need sufficient hazard insurance coverage before you can close. In California's high-risk fire zones, getting that coverage has become increasingly difficult as major insurers pull out of the market. You might have perfect credit and solid income, but without the required insurance, your loan won't close.
How VA Loans and Insurance Work Together
Your VA home loan benefit is one of the most powerful tools available to you. No down payment, no private mortgage insurance, and competitive interest rates. The VA doesn't lend money directly but guarantees a portion of loans made by private lenders, which is why you get such favorable terms.
Every lender requires homeowners insurance before closing and throughout the life of your loan. This is standard for any mortgage. Lenders need to protect their investment in case disaster strikes. In California, wildfire coverage often comes included in standard homeowners policies rather than as a separate purchase.
Lenders require dwelling coverage equal to your home's replacement cost (enough to completely rebuild if it burns down). They also need to be named as a loss payee on your policy. These basic requirements have become surprisingly difficult to meet for Veterans buying in wildfire-prone California counties.
The California FAIR Plan: A Safety Net
When other insurers won't provide coverage, the California FAIR Plan becomes your option. Created in 1968 and operated by a consortium of private insurance companies, the FAIR Plan provides basic fire coverage when nothing else is available. It currently offers up to $3 million in dwelling coverage for residential properties, covering fire, smoke, internal explosion, and lightning damage.
The catch? A FAIR Plan policy alone is bare-bones. It doesn't cover theft, liability, water damage, or other perils in standard policies. Most lenders require broader coverage, which means you'll need to purchase a separate Difference in Conditions (DIC) policy to supplement your FAIR Plan coverage.
Lenders typically accept a FAIR Plan plus DIC combination as long as total coverage meets their standards. However, some lenders won't finance homes in extreme wildfire zones even when compliant insurance exists, viewing the overall risk as too high.
California's Wildfire Insurance Crisis
The insurance landscape in California has shifted dramatically. State Farm, Allstate, and other major carriers have stopped writing new policies or non-renewed hundreds of thousands of existing customers in high-risk areas. The 2025 Los Angeles wildfires caused roughly $4 billion in insured losses just for the California FAIR Plan alone. By early 2025, more than 555,000 California homeowners were relying on the FAIR Plan, up 23 percent in just months.
For Veterans trying to use their home loan benefits, this creates real problems. When your lender processes your mortgage application, they verify that adequate insurance is available before approving your loan. If no carrier will write a policy, or if coverage costs are prohibitively expensive, your loan can't close regardless of your qualifications.
The cost problem is serious. Homeowners who previously paid $2,000 annually for coverage now face bills of $8,000 or more, with some quotes exceeding $15,000 in the highest-risk areas.
How Insurance Costs Affect Your Qualification
VA loans use two key metrics to determine affordability: debt-to-income ratio and residual income. Your DTI ratio compares monthly debt payments to gross monthly income. Residual income measures what remains after paying all debts and estimated housing costs, ensuring you have enough left for food, clothing, and necessities.
Insurance premiums hit both calculations hard. When lenders estimate your total monthly housing costs, they include principal, interest, property taxes, and homeowners insurance. In California's fire zones, insurance can represent a large chunk of your total monthly payment.
For example, say you're approved for a $400,000 loan with an estimated $2,000 annual insurance cost. But actual insurance in that ZIP code runs $10,000 annually. That extra $667 per month could push your DTI ratio above acceptable limits.
Get insurance quotes early, before making offers. Running preapproval calculations with accurate insurance estimates prevents unpleasant surprises at closing.
What to Do If Your Insurer Non-Renews
If you already own a California home with a VA loan and your insurer non-renews your policy, you have 75 days under California law to find replacement coverage. That sounds like plenty of time until you start shopping in today's market.
If you can't secure replacement insurance before your policy expires, your mortgage servicer will purchase force-placed insurance to protect their interest. These policies typically cost two to three times standard rates while providing minimal coverage. Your servicer adds the premium to your monthly escrow payment, and this can increase your monthly housing costs by hundreds of dollars overnight.
Contact your mortgage servicer immediately when you receive a non-renewal notice and start shopping for alternatives, including the FAIR Plan.
Wildfire Mitigation: Your Best Defense
California's Safer from Wildfires program requires insurers to provide discounts to homeowners who complete specific wildfire mitigation measures. These actions can also shift your property from uninsurable into an acceptable risk category in some insurer's models.
Steps include:
- Installing a Class A fire-rated roof (most asphalt shingles, concrete, or metal roofs qualify)
- Creating a five-foot ember-resistant zone around your home (removing vegetation and replacing mulch with stone)
- Upgrading to fire-resistant vents with proper mesh screening
- Maintaining proper defensible space as required by state law (100 feet of clearance)
Some measures require investment, but others like vegetation removal and debris clearing cost mainly time and effort. Check with your local fire department about grant programs that may help with costs.
Your Action Plan for High-Risk Areas
- Before making an offer: Talk to both a VA-savvy lender and an insurance broker about the property and ZIP code. Get written insurance quotes showing premium costs, and then factor insurance costs into your calculations.
- During the purchase process: Lock down written insurance commitments well before closing. Confirm with your lender that your policy type and coverage amounts meet their requirements.
- After closing: Review coverage annually and stay ahead of renewal dates. Track any non-renewal notices immediately. Maintain home hardening improvements and defensible space. Consider joining a Firewise USA community in your neighborhood.
Read more about VA home loans in general.
FAQs
Can I get a VA loan with only FAIR Plan insurance?
Yes, in most cases. The FAIR Plan combined with a DIC policy usually satisfies lender requirements. However, confirm with your lender, as some have stricter guidelines for extreme fire-risk properties.
Will high insurance costs prevent me from qualifying?
They can. High insurance costs increase your DTI ratio and reduce residual income.
What happens if my insurer non-renews after I have a VA loan?
Contact your mortgage servicer immediately and start shopping for alternatives. If you can't find coverage, your servicer will purchase expensive force-placed insurance and add the cost to your monthly payment.
Do wildfire mitigation improvements actually help?
Yes. Insurers use sophisticated risk models that factor in roof type, defensible space, and ember-resistant vents. Properties meeting Safer from Wildfires standards may qualify for coverage when similar properties without improvements cannot.
Should I avoid buying in wildfire-prone areas?
That depends on your situation. These areas often offer more affordable home prices precisely because of fire risk. If you can secure insurance, maintain adequate residual income, and commit to ongoing home hardening, buying in a wildfire-prone area may work for you. Always get insurance quotes before making purchase decisions.
