I've sat with a lot of people in the months and weeks before they buy a home, and one thing is true almost every time: buying a house can be one of the most emotional financial decisions any of us ever make. That's fine when there's room to spare in the budget. It gets dangerous when the feeling pushes you to stretch on both ends — overbidding to buy the house, then straining to afford owning it — on a place you mean to keep forever.
Because when a house becomes the house — the forever home, the legacy property, the place you picture your grandkids visiting — emotion starts making the financial decisions. We stretch. We overbid. And we wave away the boring questions, like who is actually going to insure it.
A cautionary tale from the Berkeley hills
A client of mine found his forever home in the Berkeley hills. He loved it, and in a competitive market he overbid — significantly — to make sure it was his. There was one wrinkle he'd made peace with: the house sat in high enough fire risk that no standard carrier would write it. His only option was California's FAIR Plan, the state's insurer of last resort. He budgeted $6,500 a year for the policy and moved forward.
Days after he closed, the San Francisco Chronicle reported that the FAIR Plan had gone to the state insurance commissioner for a steep rate increase — and gotten it. Rates are set to climb about 30% on average this fall, with roughly half of homeowners facing hikes of 30 to 50%. On a $6,500 policy, that's somewhere around $2,000 to $3,250 more a year. He learned it after the ink was dry, on a house he intends to own for the rest of his life.
Why the FAIR Plan is a warning light, not just a line item
The rate hike is the headline, but it's the least of it. Looking harder at the FAIR Plan — in the reporting since the 2025 Los Angeles fires — what stands out is how much risk it quietly leaves sitting on the homeowner:
- It's bare-bones. The FAIR Plan covers fire, smoke, and lightning, and not much else. Water damage, theft, and liability aren't included — you have to buy a separate wrapper policy on top, at extra cost, just to get what an ordinary homeowners policy would have given you.
- Claims can be slow and contested. After the LA wildfires, a state Department of Insurance review found systemic problems — delays, denials, inconsistent decisions — and the plan was cited for failing to follow more than a dozen of its own recommended fixes. Homeowners have sued over denied smoke-and-ash claims. The moment you most need the policy to pay can be the hardest time to collect on it.
- The price isn't stable, and it isn't only yours. FAIR Plan enrollment has ballooned more than 150% in a few years. After the LA fires the plan ran short and needed a billion-dollar infusion — half of it ultimately passed to policyholders across the state through assessments. Costs can climb even for people nowhere near a fire.
Take it as the warning it is: when the state's insurer of last resort is the only company that will touch a house, the market has already delivered its verdict on the risk — and it's worth listening to before you fall the rest of the way in love.
The longer you'll own it, the more the risk matters
Here's the part I most want buyers to sit with. We tend to think a forever home is where we're allowed to be a little irrational — it's the dream, after all. But that's exactly backwards.
With room to spare in the budget, a bad surprise is survivable. If the insurance doubles or the market turns, you have the slack to absorb it — or the freedom to sell and move on. Stretch to buy and own a forever home, and you have neither a cushion nor any desire to exit. You aren't renting the risk; you're marrying it. Every rate hike, every slow claim, every statewide assessment compounds over the decades you plan to hold — and often lands on the next generation you meant to hand the place to. The longer your time horizon, the more a climate risk matters, not less.
Love the house. Check the risk first.
I'm not in the business of talking people out of homes they love. I'm in the business of making sure the love is going into something that will still love them back in twenty years. So before you write the offer on a forever home — especially the emotional ones — take the unromantic step first: find out who will insure it, at what price, and which way that price is heading. Read the property's risk the way you'd read an inspection report, before you're committed, not after.
A forever home is a long bet on one piece of the planet. Make sure it's a bet you'd still make with your eyes open — after the premiums, the claims, and the climate have all had their say.