An analysis predicts that California’s home insurance premiums will rise by 21% this year, more than double the national average. This surge is attributed to the devastating Los Angeles wildfires in January, coupled with rising construction and labor costs due to President Donald Trump’s tariff policies and immigration measures.

On the 15th, insurance data firm Insurify reported that California’s home insurance premiums are expected to increase by 21% by year-end, compared to a national average of 8%. By the end of the year, the average annual premium in California is projected to reach $2,930, up over $500 from last year’s $2,424.

California residents have long paid higher-than-average premiums due to the state’s elevated housing prices and risks from natural disasters like wildfires. However, industry experts and stakeholders note that the challenges facing California’s housing market this year are unprecedented.

The Palisades and Eaton wildfires in January burned 23,448 and 14,000 acres, respectively, destroying over 18,000 structures. According to UCLA, the total losses from these fires are estimated at $131 billion, with $45 billion in insured losses. California’s state-run FAIR Plan anticipates potential losses exceeding $4 billion from these fires.

The situation is compounded by the Trump administration’s broad tariff policies, which are expected to significantly increase construction costs. Trump has imposed tariffs on Canada, Mexico, and China, and on December 12, he introduced a 25% tariff on steel and aluminum. The National Association of Home Builders (NAHB) notes that about 10% of materials used in U.S. home construction are imported, with roughly 30% of the nation’s lumber coming from Canada. Rising material costs lead to higher rebuilding expenses, increased insurer burdens, and, ultimately, higher premiums in a vicious cycle. Tariffs could increase imported construction material costs by up to $4 billion. Daniel Lucas, an insurance relations manager at Insurify, emphasized, “The cost of rebuilding or repairing homes is a key factor in determining premiums. When construction material prices rise, those costs are passed on to policyholders.” Insurify estimates that tariffs alone could account for over 15% of California’s premium increases.

The rising premiums are dominating discussions in California’s housing and insurance industries. In February, State Farm, which holds a 20% share of California’s housing market with about 3 million policies, requested a 22% premium increase from the state government and has been holding briefings for homeowners, stating that “significant premium hikes are inevitable.” State Farm has paid out over $2.75 billion for 12,390 claims related to the LA wildfires, estimating direct losses at $7.6 billion but expecting to reduce its losses to $612 million through reinsurance.

According to Insurify’s analysis, the states with the highest projected increases in average home insurance premiums this year are Louisiana (27%), California (21%), Iowa (19%), Hawaii (17%), and Minnesota (15%).

<Hongyong Park>