Experts sound alarm over new state insurance law going into effect in 2026: 'Exposing thousands of homeowners to serious financial risk'

An experimental shift in Nevada's insurance market is set to begin in January 2026, and experts say it could be bad news for homeowners already struggling to get coverage.

What's happening?

The Reno Gazette Journal reported that the law opens a four-year window, a "sandbox" where insurers can test policy variations currently prohibited in the state. For the first time, companies will be allowed to sell policies that exclude wildfire damage or even offer wildfire-only coverage as an add-on.

Nevada Insurance Commissioner Ned Gaines argues the sandbox could stabilize the market by preventing insurers from abandoning high-risk regions entirely. But some experts disagree, arguing it could instead put homeowners at a greater risk of not having enough coverage.

State data shows wildfire-related policy cancellations and non-renewals jumped 82% last year alone, with insurance application denials more than doubling. Communities near Lake Tahoe and along the eastern Sierra Nevada Mountains have been hit hardest.

Per the RGJ, State Assemblyman P.K. O'Neill, who proposed the law, said: "The message was, 'We have to do something, we have to try something.' This bill covers that. If we kept doing what we were doing and we did nothing, that was going to be catastrophic."

Why is this new law concerning?

This debate is unfolding as warming global temperatures — driven largely by pollution from burning fossil fuels — intensify the West's wildfire seasons. As fires grow hotter and more destructive, insurers are footing bigger bills. That's why many have raised premiums, restricted coverage, or pulled out of markets altogether.

If companies use the sandbox to strip wildfire coverage from standard policies, homeowners who don't read the fine print risk losing not just their coverage, but their homes. Mortgage requirements often demand continuous fire insurance, meaning some residents could face loan defaults or forced sales.

"Some consumers may not realize that wildfire coverage is no longer included in their standard policies," said Michele Steinberg and Christina Rust of the National Fire Protection Association, per the RGJ. "Others may be unwilling or unable to pay for an additional policy. In the most extreme case, wildfire insurance could disappear from the market altogether, exposing thousands of homeowners to serious financial risk."

What's being done about the issue?

Officials say that all experimental policies will still require approval, and no insurer has yet filed plans to remove wildfire protections. Supporters of the law hope the sandbox will attract new competition and encourage innovation. "One important thing is the incentive for the incumbent private companies to innovate rather than stagnate," said Anahit Baghshetsyan from the think tank Nevada Policy, per RGJ.

Looking forward, solutions to this growing problem will require both strong consumer protections and efforts to reduce the underlying risks. From home protection strategies to using satellite technology and turning to nature itself, innovators everywhere are looking for ways to mitigate the risks and damage from wildfires. People at home can also get involved by exploring critical climate issues.

But experts warn that without strong oversight, Nevada's experiment could widen the insurance gap when people need protection most.

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