January marks one year since the devastating California wildfires of 2025 - the costliest wildfire events in state history. While the immediate damage was visible in burned homes and displaced families, the most consequential lessons emerged over the months that followed: delayed claims, valuation shortfalls, ownership mismatches, and coverage gaps that surfaced only after families needed their insurance the most.
For affluent families, family offices, estate-planning attorneys, and wealth advisors, the wildfire crisis became a real-world stress test of personal insurance programs and risk governance. It revealed where long-standing assumptions held and where they failed.
Throughout this article, we highlight two perspectives for each key lesson:
- 2026 Insights that reflect how the insurance market, underwriting, litigation, and carrier behavior have evolved since the fires
- Best Practices that families and advisors can apply now to build stronger, more resilient programs going forward
Together, these insights are intended to move the conversation beyond hindsight and toward action — helping families use the lessons of 2025 to make smarter, more informed decisions in 2026 and beyond.
Underinsurance Was the Costliest Surprise
One of the most painful discoveries for homeowners after the fires was how far their coverage limits fell short of true reconstruction costs.
Even families who believed they were well insured found themselves facing gaps of hundreds of thousands and in some cases millions of dollars. California construction inflation, labor shortages, hillside rebuilding challenges, code upgrades, and specialty materials all compounded the problem.
This issue has now escalated into active litigation. Several lawsuits filed in 2025–2026 allege that carriers:
- Relied on reconstruction tools that understated real rebuild costs
- Failed to update valuations as market conditions changed
- Sold policies that appeared to provide full replacement value, but didn’t
In many cases, even extended replacement cost (ERC) provisions were insufficient.
2026 Insight
For high-value homes, relying solely on a carrier’s automated estimator is no longer defensible. Homes with architectural significance, imported materials, complex mechanical systems, extensive hardscape, or custom interior finishes require verified, defensible valuations.
Best practice
Reevaluate replacement cost every 12–18 months, and immediately after any renovation, expansion, or material upgrade.
Trusts and LLCs Created Real Claim Complications
Another hard lesson from the 2025 wildfires: ownership structure matters and mismatches can delay or jeopardize claims.
Many homes impacted by the fires were titled to:
- Revocable or irrevocable trusts
- LLCs or LLPs
- Family partnerships
- Multi-generational estate structures
Yet the insurance policies often listed only an individual homeowner as the Named Insured even though that individual no longer legally owned the property.
Why this matters
California law requires the Named Insured to have an insurable interest in the property. When a trust or LLC owns the home but isn’t properly named on the policy, insurers can question or contest coverage.
Post-wildfire coverage attorneys reported:
- Claims delayed for months while ownership was reviewed
- Policies challenged because the legal owner was not insured
- Families forced to produce deeds, trust agreements, and amendments during an already traumatic time
2026 Insight - Insurance must now be treated as an extension of estate planning and not a separate silo.
Best practice
Any time a property is moved into a trust, LLC, or partnership, the insurance policy must be updated immediately. This requires coordination between the wealth advisor, estate attorney, and insurance advisor — an area where many families discovered blind spots in 2025.
The Shift to Non-Admitted Carriers Exposed Coverage Gaps
Between 2023 and 2025, many admitted carriers reduced or eliminated capacity in wildfire-exposed regions. As a result, thousands of affluent homeowners were placed into surplus lines (non-admitted) carriers. These markets play an important role, but their policies differ significantly from admitted forms:
- Named-perils vs. all-risk coverage
- Wildfire sublimits that vary widely
- Limited or capped code-upgrade coverage
- Less standardized policy wording
For luxury homes, small wording differences often translated into six- or seven-figure differences in claim outcomes.
2026 Insight - Placement matters more than ever. Being “covered” is no longer enough - families must understand how they are covered.
Best practice
If your home was moved to a non-admitted carrier during the wildfire crisis, a detailed policy review is essential. For larger or more complex homes, layered or hybrid admitted/surplus-lines strategies are increasingly common.
Physical Wildfire Mitigation Is Now Part of Risk Governance
Wildfire resilience is no longer just about geography - it’s about preparation.
Science-backed standards, including the IBHS Wildfire Prepared Home™ framework, have shown measurable impact. Homes that implemented these measures performed significantly better during the 2025 fires. Key mitigation elements include:
- A fully noncombustible zone 0–5 feet around the home
- Maintained defensible space extending 5–30 feet outward
- Ember-resistant vents
- Class A roofing
- Noncombustible siding or proper ground clearance
- Metal gutters and protected soffits
Insurers are increasingly incorporating these factors into underwriting decisions, pricing, and capacity allocation.
2026 Insight - For high-value homes, physical mitigation is no longer optional - it’s part of responsible asset stewardship.
What UHNW Families Should Prioritize in 2026
Based on what the 2025 wildfires revealed, affluent families should focus on five key actions this year:
- Reevaluate replacement cost now
Don’t wait for renewal - construction costs remain volatile. - Verify the legal owner is correctly listed
Trusts, LLCs, and partnerships must be explicitly named. - Review extended replacement cost and wildfire deductibles
ERC provisions vary significantly by carrier and form. - Evaluate admitted vs. surplus-lines placement strategy
Layered solutions may provide better outcomes for complex risks. - Complete a wildfire mitigation assessment
Insurers increasingly reward defensible space and structure hardening.
Looking Forward
The 2025 California wildfires permanently changed the personal insurance landscape. They exposed how quickly coverage assumptions can unravel and how critical proactive planning truly is.
For families who take action in 2026, these lessons create opportunity: stronger protection, fewer surprises, and programs designed for the realities of today’s risk environment.
Call to Action
Your home is one of your most valuable assets and the wildfires of 2025 showed how quickly coverage gaps can become financial losses. To ensure your home is properly valued, correctly titled, and positioned for wildfire risk, reach out to a BCU Risk Advisor.
Our team can help you:
- Verify accurate replacement cost
- Align trusts, LLCs, and ownership structures
- Navigate admitted vs. surplus-lines options
- Build a mitigation plan using science-based standards
- Strengthen your personal risk program for 2026 and beyond
BCU Risk Advisors
Trusted guidance for affluent families and family offices.