Will Nevada wildfire coverage exclusion make insurance unaffordable?

Takeaways:

• Separate wildfire coverage raises affordability concern
• Mortgage lenders could influence creation of state-backed coverage
• Being allowed to exclude wildfires could keep home insurers from leaving the state

Nevada's new law allowing home insurers to exclude wildfire coverage raises concerns about affordability of standalone wildfire insurance in the state, according to an insurance industry expert and author.

In California, when earthquake coverage was excluded from standard home insurance, the California Earthquake Authority non-profit insurance company was created to provide the coverage, noted Katherine Hempstead, senior policy advisor at the Robert Wood Johnson Foundation and author of "Uncovered: The Story of Insurance in America." 

Nevada AB 376, passed unanimously by a Democratic-majority state senate and assembly in May and June 2025, took effect on January 1.

Without affordable wildfire insurance, Nevada's homebuying market could be affected because mortgage lenders will not back home sales, Hempstead noted. "Is there going to be a standalone market for wildfire coverage that is affordable for enough people, or are we going to see serious problems that threaten property markets?" she said. "Are people going to be able to sell their homes? That would really force the state to step in and do something to try to allocate some of the risk to the public sector."

According to the Nevada Division of Forestry, wildfires are a threat in the state. The threat is intensified by rapid population growth into areas where urban and wild environments meet. "Increasing effects of long term drought and increased fuel loading conditions represent major concerns moving forward into the future," states text on the agency's website.

United Policyholders, an insurance consumer advocacy group, supports the new law, seeing it as a way to keep insurers in the state. "Although Nevada is not as wildfire-prone as California, the state's Division of Insurance reported in 2025 that insurers have increasingly declined to write or renew policies in higher-risk areas such as Incline Village and Stateline," stated a press release from the group. "Allowing wildfire exclusions may give insurers greater flexibility to remain in the market rather than restricting underwriting entirely."

However, mortgage lenders' response to the exclusion is still unknown, according to United Policyholders. Also, the group noted, as flood insurance is typically not included in standard home policies, mortgage lenders require separate flood coverage on properties in high-risk areas. The same situation could occur with wildfire insurance in Nevada.

This can create another issue for home policyholders, as Hempstead pointed out. "Just like a lot of people don't know they're not covered for flood, people might not know that they're not covered for wildfire," she said. "It's incumbent upon the insurance department to do everything they can to make sure people understand that. Even to have something on the policy form that requires people to acknowledge that they understand it."