As wildfires tear through Southern California, destroying entire neighborhoods and upending lives, one question dominates the minds of homeowners: Will my insurance cover it—and when will I see the money?
In a revealing interview on California Insider, insurance expert Karl Susman, President of Susman Insurance Agency and host of Insurance Hour, offered a candid look inside how insurers are responding to the Los Angeles fires, how payouts are being handled, and what challenges both policyholders and companies face in this unprecedented disaster.
His insights shed light on the complex machinery behind California's embattled insurance system—a system straining under billions in losses, workforce shortages, and regulatory constraints, yet still tasked with protecting homeowners in the nation's most wildfire-prone state.
According to Susman, the devastation from the LA fires is staggering. Thousands have been evacuated, and over a hundred of his own insured clients have lost their homes entirely.
"At last count, about 104 of our insureds have total losses," Susman said. "And when you count smoke, ash, and heat-related damage, that number jumps to several hundred."
The scale is so large that insurance adjusters are being flown in from across the country to handle the claims surge. Insurers are issuing electronic fund transfers (EFTs) in the millions—sometimes within days—to help displaced homeowners begin recovery.
Despite the speed of some payouts, Susman cautioned that many homeowners, especially those insured under the California FAIR Plan, face slower responses due to capacity issues rather than ill intent.
"It's not that they don't want to pay—it's that they don't have enough people," he explained. "You might have one adjuster handling hundreds of claims."
California's FAIR Plan (Fair Access to Insurance Requirements) was designed as a last-resort fire insurance option for homeowners who can't find private coverage. It's not state-funded; rather, it's a shared pool supported by all admitted insurance companies in California.
Susman clarified its structure:
The FAIR Plan has cash reserves, reinsurance, and the ability to issue bonds.
If losses exceed available funds, it can assess all admitted carriers in the state to replenish its pool.
In extreme cases—over $1 billion in losses—insurers can request permission from the California Department of Insurance (CDI) to pass part of those assessments back to policyholders.
But this process is cumbersome. FAIR Plan lacks the staffing, technology, and adjuster capacity of large private carriers. That's why payouts lag behind "name-brand" insurers like State Farm or Allstate.
"They're bringing in non-employees and contractors just to process claims," Susman said. "They're doing the best they can with limited resources."
Despite these challenges, FAIR Plan's financial foundation is solid. With reinsurance and the backing of California's entire admitted insurance market, it can pay claims—it just can't do it quickly.
Homeowners with replacement cost coverage in California generally have three options after a total loss:
Rebuild on the original property.
Buy another home elsewhere.
Build a new home in a different location and transfer the mortgage.
"If they have a replacement cost policy, they can rebuild, purchase elsewhere, or build somewhere else—and the mortgage will move to that property," Susman explained.
However, those who choose not to rebuild or replace may only receive the actual cash value (ACV)—the depreciated value of the structure—rather than the full replacement amount.
This distinction is critical. Insurance is designed to restore the homeowner to their prior financial position, not to hand out cash for unrelated purposes. Failure to rebuild may result in significantly smaller settlements.
Even after a total loss, the mortgage holder remains an essential part of the process.
"The bank is a payee on the claim," Susman said. "They want to make sure the collateral—the home—is rebuilt."
Insurers often issue checks payable to both the homeowner and lender. Funds may be held in escrow until reconstruction begins. Banks fear a repeat of what followed the 1994 Northridge Earthquake, when uninsured homeowners abandoned properties rather than rebuild, leaving lenders with unrecoverable loans.
In today's fires, homeowners with insurance are protected—but those who delay rebuilding or choose relocation must coordinate carefully with both their insurer and lender to avoid complications.
Perhaps the biggest challenge Susman foresees isn't insurer unwillingness—it's coverage inadequacy.
Many Californians, trying to save on premiums, have gradually lowered coverage limits below true rebuilding costs. With post-disaster construction inflation—where labor and materials can quadruple overnight—the shortfall can be catastrophic.
"Rebuilding costs can be four times higher after a major event," Susman warned. "When it's your house, it's one thing. When it's the entire city, it's another."
Those who are underinsured may need to rely on FEMA grants (up to ~$80,000 for residents) or SBA disaster loans (up to $2–3 million for businesses or nonprofits). But these funds are loans—not replacements—and are often insufficient to close large gaps.
California's wildfire losses have transformed what used to be "250-year events" into near-annual crises. That's breaking insurers' predictive models and driving up rates.
"These were supposed to happen once every 250 years," Susman said. "Now it's every few years."
As a result, expect:
Steep premium increases in high-risk wildfire zones.
More competition and lower rates in low-risk areas.
Continued tightening of underwriting guidelines, making coverage harder to find for rural or brush-adjacent properties.
The California insurance market is essentially rebalancing risk—high-risk areas will pay more, while safer regions may benefit from insurer competition.
Contrary to popular belief, the FAIR Plan isn't a budget option. It's expensive coverage for limited protection.
A standard homeowners policy covering fire, water, theft, and liability might cost $3,000–$4,000 annually, whereas a FAIR Plan fire-only policy can run $10,000–$15,000 or more.
"Fair Plan is discount coverage, but not a discount price," Susman said pointedly.
Still, for many homeowners in brush zones, it's the only viable path to maintain compliance with mortgage requirements. Without it, lenders impose forced-placed insurance—a minimal policy that protects the bank's interest, not the homeowner's equity or ability to rebuild.
The fires also exposed California's shrinking admitted insurance market—the group of carriers licensed and regulated by the CDI.
Admitted carriers must:
Participate in FAIR Plan assessments
Follow state rate approval processes
Contribute to insolvency protection funds like the California Insurance Guarantee Association (CIGA)
Non-admitted carriers, such as Lloyd's of London, are not bound by these restrictions. They can set their own rates and underwriting rules. Historically, non-admitted coverage was reserved for high-risk or unique cases, but as admitted carriers withdraw, non-admitted policies are becoming more common—and costly.
"It's not about whether a company is admitted," Susman explained. "It's about whether they have the financial strength to pay claims."
Every major California fire also impacts the global insurance ecosystem. When insurers pay large claims, they turn to reinsurers—international companies that share the risk.
This LA fire event, estimated at $500 billion in total economic losses, will trigger massive reinsurance payouts, raising costs worldwide.
"Reinsurance companies write checks for these events," Susman noted. "That affects rates everywhere—from California to Europe."
As a result, homeowners across the U.S. may see ripple effects in future premiums, even if they live far from wildfire zones.
Perhaps the most compelling insight from Susman's interview was his empathy for clients navigating unimaginable loss.
"We tell people, don't be brave—don't be the one on the roof with a hose," he said. "Your safety comes first."
His agency has been working 24/7, fielding calls and emails from displaced families at all hours.
"They buy insurance—and all they get is a PDF and us," he reflected. "So we have to be even better."
This human connection—bridging bureaucracy and compassion—is what keeps the industry grounded amid chaos.
California's insurance crisis is no longer hypothetical—it's here. The LA fires mark a breaking point where insurers, regulators, and policyholders must confront reality: coverage will cost more, rebuilding will take longer, and the system must adapt to a new era of catastrophe frequency.
Susman's core message was clear:
Don't assume your policy will automatically cover today's rebuilding costs.
Stay in contact with your insurer and agent.
Document everything.
And most importantly, review your coverage annually—before the next fire season begins.
"Don't start off assuming the worst," he advised. "Most companies are paying—and paying fast. But if you have a problem, speak up, escalate, and stay engaged."
In a landscape defined by loss, uncertainty, and resilience, informed homeowners aren't just better prepared—they're better protected.
