insurance rates affecting home prices - California insurance crisis real estate

Rising home insurance costs are starting to influence buyer decisions in the Bay Area. In wildfire zones and older neighborhoods, higher premiums and limited policy availability can affect affordability and price negotiations. Sellers should understand how insurance factors into buyer caution and lending.

Are Insurance Rates Affecting Prices?

Rising Premiums, Rising Caution

Insurance has become a bigger part of the home-buying conversation in California, particularly in wildfire-exposed areas like Marin’s hills and certain SF neighborhoods with older infrastructure. Premiums that were once a minor line item can now run several thousand dollars per year, shifting how buyers calculate their total monthly costs. It matters where the home is located, so it is a conversation we should have anytime you become interested in a property.

In competitive urban markets like San Francisco, rising insurance costs may not stop a motivated buyer, but they can influence how aggressively someone bids. In Marin, where many homes are in the Wildland-Urban Interface (WUI), buyers are increasingly factoring in insurance quotes early in the process, sometimes lowering offers to account for higher long-term carrying costs. Most importantly, if insurance could be an issue, it’s wise to make securing coverage a contingency of the purchase offer. Remember: if a loan is involved, home insurance must be in place before the lender will fund, so identifying any challenges early is essential.

Insurance Availability and Lending

A key shift is availability. Major insurers have scaled back new policies in parts of California, leaving buyers to navigate the state FAIR Plan or specialty carriers. Lenders typically require proof of insurability before closing, so if coverage is hard to secure or significantly more expensive than expected, it can delay or even derail transactions.

Buyers working with savvy agents will often request seller-provided insurance information upfront, including past policy details and inspection records that might affect coverage. Sellers who prepare this information early can help maintain buyer confidence and avoid last-minute surprises.

Insurers evaluate a range of factors when determining coverage and pricing, including proximity to the Wildland–Urban Interface (WUI), the presence of knob-and-tube wiring, roof age, galvanized plumbing, and water heater age, among others. Understanding and addressing these issues in advance can make a property more attractive and reduce the risk of delays during escrow.

What Sellers Should Do

Get a current insurance quote (even if you’re not switching carriers). This helps set buyer expectations.
Understand wildfire defensible space requirements and make any easy compliance upgrades before listing.
Gather past insurance documents so buyers and lenders can verify coverage quickly.
Highlight recent upgrades that reduce risk, like new roofs, updated electrical, cleared vegetation, or seismic retrofits.