I spend a lot of time watching mortgage rates, housing data, and anything else that can affect what my clients can comfortably afford when buying a home. This one caught me by surprise.

Beginning October 15, 2026, California FAIR Plan residential insurance rates are increasing by an average of 29.1%. KQED reported the change back in August, and somehow I missed it!

Before anyone sees that number and thinks their homeowners insurance is automatically going up 29%, let me explain what this actually means because there is an important distinction.

What Is the California FAIR Plan?

If you have never heard of the California FAIR Plan, you’re probably not alone.

Most homeowners purchase homeowners insurance through traditional insurance companies. However, in some parts of California, particularly areas with higher wildfire exposure, getting regular homeowners insurance has become more difficult. Some insurance companies have stopped writing new policies in certain areas or have become much more selective about which properties they will insure.

When a homeowner can’t find coverage through the regular insurance market, the California FAIR Plan can become an option. Think of it as a fallback for properties that may be difficult to insure through a traditional insurance company.

The FAIR Plan provides basic property coverage, including fire coverage, but it isn’t necessarily the same thing as a traditional homeowners policy. Depending on the property and situation, homeowners may need additional coverage to fill in some of those gaps.

So, if you’re looking at a house and your insurance agent says, “This home may need the FAIR Plan,” pay attention because the cost of that insurance becomes part of your housing payment.

Does This Mean Everyone’s FAIR Plan Premium Is Going Up 29.1%?

No, the 29.1% is an average increase across FAIR Plan residential policies, not an automatic 29.1% increase for every property. The actual change will depend on the property, its location and, in particular, its wildfire risk.

Some homeowners will see smaller increases while others may see considerably larger ones. KQED reported that some homeowners with greater wildfire exposure could even see the wildfire portion of their premium double.

For existing FAIR Plan customers, the new rates begin affecting policies as they renew under the new rate structure beginning October 15.

So, this isn’t just something that affects somebody buying a house next month. If you currently own a home with a FAIR Plan policy, I would pay close attention to your next renewal.

Why Is a Dan the Mortgage Guy Talking About Homeowners Insurance?

Because when you buy a home, your mortgage payment is only one part of what you actually pay every month.

When I qualify a buyer, I’m looking at principal and interest, property taxes, homeowners insurance, mortgage insurance when applicable, HOA dues and the other obligations that make up the actual monthly housing expense.

This is why insurance has become a much bigger conversation with my buyers than it was years ago.

Here’s a real-world example.

I’m working with a buyer right now who received a FAIR Plan quote of approximately $3,400 per year. If we simply use the 29.1% statewide average as an illustration, that would increase the cost by approximately $989 per year, or about $82 per month.

For a buyer who is comfortably below their qualifying limits, an extra $82 per month might not change anything. But what if the buyer is already close to the maximum debt-to-income ratio allowed for the loan? What if they were already stretching a little farther than they wanted to get into the home?

Now that extra $82 matters.

It could reduce their purchasing power or, in a tight enough situation, even affect whether they still qualify for the loan.

But qualification isn’t really my biggest concern. Just because somebody can qualify for a payment doesn’t necessarily mean they are comfortable making that payment every month.

This Is Why I Want Buyers Checking Insurance Earlier

Years ago, homeowners insurance was often something we dealt with later in the transaction. Today, especially in certain parts of California, I don’t think that’s a good strategy anymore.

If you’re considering buying in the Sacramento region, Sierra foothills, Placer County, El Dorado County or another part of California where homeowners insurance has become difficult or expensive, I would strongly recommend getting an insurance estimate early in the process.

Ideally, I’d like to have a pretty good idea what the insurance will cost before we’ve stretched a buyer’s approval around a particular house.

Think about this from the buyer’s perspective. You find a home you love, we’ve run the numbers and you’re comfortable with an estimated payment of $3,500 per month. You make the offer, get into contract and then find out the insurance on that particular property is significantly more expensive than we estimated.

The purchase price didn’t change. The mortgage rate didn’t change. But the cost of owning the home did. I’d much rather discover that before you fall in love with the house.

Current Homeowners Should Be Paying Attention Too

This isn’t only a homebuyer issue.

The FAIR Plan has grown tremendously as traditional insurance companies have pulled back from some parts of California. According to the California FAIR Plan, as of June 2026 it had 696,562 dwelling and commercial policies in force, with approximately $768 billion of total exposure. Those are pretty staggering numbers.

If you currently have a FAIR Plan policy, don’t assume the 29.1% headline tells you exactly what your renewal will look like. Pay attention when the renewal arrives and look at the actual premium.

I would also periodically check with a knowledgeable insurance professional to see whether other options have become available. California’s insurance market continues to change, and the FAIR Plan may not always be your only choice.

The Bigger Lesson for Homebuyers

I’ve been doing mortgages for more than two decades, and one thing I’ve learned is that the interest rate gets most of the attention, but it’s only one piece of whether a home is truly affordable.

I get asked all the time, “How much house can I qualify for?”

My answer is usually another question: “What monthly payment are you actually comfortable with?”

Those are two very different questions.

When we’re figuring that out, we need to look at the whole picture: mortgage payment, property taxes, homeowners insurance, mortgage insurance, HOA dues, maintenance and the other expenses that come with owning the home.

Homeowners insurance has become a much bigger part of that equation in California, and I suspect that isn’t changing anytime soon.

So if you’re thinking about buying a home, especially in an area where insurance might be challenging, let’s figure out the insurance cost early and build it into the numbers before you make an offer.

The goal isn’t simply figuring out the biggest mortgage you can qualify for. The goal is making sure the home, and the entire monthly payment that comes with it, fits comfortably into your life.

If you’re buying a home anywhere in California and want to understand what the entire monthly payment may look like before you make an offer, feel free to reach out. I work with buyers throughout California, and I’m always happy to run the numbers with you.

Dan Tharp
Dan the Mortgage Planner
Senior Loan Officer | Guild Mortgage
NMLS #280913
📱 916-257-1470 (Call or Text)
Sacramento, CA

Sources: California FAIR Plan Association; California Department of Insurance; KQED, “California FAIR Plan Announces 29.1% Rate Hike for Homeowners This Fall,” August 11, 2026.

This information is for educational purposes only and is not insurance advice. Insurance premiums, coverage and availability vary by property. Please consult a licensed insurance professional regarding your individual insurance needs. Loan qualification is subject to applicable underwriting requirements.