An insurance crisis continues to rattle California’s foster care system, threatening to displace thousands of vulnerable children.
Since 2024, more than two dozen nonprofits that recruit, train and support foster parents have shuttered across 13 counties, according to the California Department of Social Services.
Counties have historically relied on the licensed nonprofits, known as foster family agencies, to place children — especially those in need of intensive support — in certified homes until they are adopted or reunified with their birth families.
Their closures come two years after a key insurance carrier backed out of covering foster family agencies, citing rising legal costs. The company, Nonprofits Insurance Alliance of California, covered approximately 90% of the more than 200 foster family agencies operating throughout the state, leaving them scrambling to find a replacement.
No other California insurers have stepped in since then, forcing foster family agencies to secure coverage from companies outside the state — and sometimes, outside the country. In an unregulated market, that’s meant that agencies have seen increases of 200 to 400% in their liability coverage. Many are reporting cost hikes of more than $350,000 in annual premiums.
The Legislature last year approved a one-time $31.5 million allocation to buoy the agencies as they face unsustainable premiums, but the money has run out. Assemblymember James Ramos, a Democrat from San Bernardino, and Sen. María Elena Durazo, a Democrat from Los Angeles, recently requested another $30 million in relief funding.
Adriana Heldiz
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CalMatters
Tony Iagmin holds a three-month-old baby at his home in San Diego’s Lakeside neighborhood on Feb. 23, 2026. Tony and Sara Iagmin are fostering the baby.
But without any long-term policy solutions, advocates warn that the whole system is at risk of collapsing. It would start with some or all of the remaining foster family agencies closing. Foster parents, lacking the support that’s needed to sustain them, could then exit the child welfare system altogether and kids would face even more instability, the advocates say. And medically fragile children — including kids with feeding tubes, developmental disabilities or drug dependencies from their mothers — are especially at risk because counties don’t typically have sufficient resources to provide that level of care.
“It would be an absolute crisis if the foster family agencies closed,” said Diana Boyer, managing director of research and policy at the County Welfare Directors Association of California. “Foster children are the state’s children. We all collectively need to be doing more to support them and ensure that they have homes and families to go to.”
The crisis is tied to California’s attempts to provide redress to survivors of sexual abuse. Legislation passed in 2019 lifted the statute of limitations, allowing survivors to sue government agencies. Thousands of lawsuits have been filed since then, and hefty payouts have driven up insurance costs for public agencies across the board. Schools were among the first to feel the pinch from rising costs for insurance to cover liability from the suits.
The Nonprofits Insurance Alliance of California stopped renewing insurance policies following a $25 million jury award to three children after jurors found that a foster family agency in Santa Rosa failed to protect them from sexual abuse. The group had also made a mostly failed effort to reform aspects of California law related to insurance and liability.
‘Our collective responsibility’
Roughly 300 foster family agencies operate throughout California, providing critical services to approximately 6,500 of the state’s 45,000 foster children.
Counties run many of their child welfare placements through the community-based nonprofits because of their quality of care — especially for kids with the highest needs.
If a child is removed from their home in the middle of the night due to abuse or neglect, foster family agencies quickly step in with supportive homes that are “at the ready,” said Pete Weldy, chief executive officer at the California Alliance of Child & Family Services, which represents roughly 200 foster family agencies around the state.
After initial placement, the agencies continue to work with foster families and kids to provide sustained support, including around-the-clock care, crisis assistance, and consistent case management.
When an agency shutters, the child’s placement could be disrupted.
“That’s one of the untold stories of this whole crisis,” Weldy said. “It could mean that the youth has to move to a different county, to a different foster family. They could be uprooted from their family. They might have to change schools, maybe move communities, lose their friends.” The disruption, he added, can often exacerbate behavioral health needs. “Eventually, it could lead to the worst outcome, which is that the child ends up unhoused,” he added.
If counties are unable to find a placement, Weldy said the child may end up in a hotel, hospital, or conference room.
“This is the state’s responsibility and really, therefore, all of our collective responsibility to make sure these really vulnerable kids and youth have what they need to thrive,” he said. “And that’s where foster family agencies do such an incredible job.”
Foster families ‘knew who to turn to’
Adriana Heldiz
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CalMatters
Tony and Sara Iagmin play with the baby they are fostering at their home in San Diego’s Lakeside neighborhood on Feb. 23, 2026.
Sara and Tony Iagmin have fostered 45 children since 2013, when they started working with Angels, a San Diego-based foster family agency that recently closed due to the insurance crisis. Over that period of time, they worked with three case managers from the agency that would make weekly visits to the child or children they were currently fostering. That consistency served them and their foster children well, they said.
“We knew who to turn to and how to get support for everything that came up,” Sara Iagmin said.
They fear that the increasing number of agency closures will result in more kids falling through the cracks and hurt foster parents, especially those who are new to the child welfare system and may need additional support.
“Foster family agencies are like AAA and the county is like the DMV,” Tony Iagmin said. “They have good workers, but it’s a lot of bureaucracy.”
Since Angels closed, the Iagmins started working directly with San Diego County. They said they feel well-equipped to handle the shift since they’ve been foster parents for so long, but will miss the community they found through Angels.
Tony and Sara Iagmin at their home in San Diego’s Lakeside neighborhood on Feb. 23, 2026.
Photos of families Sara and Tony Iagmin have worked with over the years hang on a wall at their home in San Diego’s Lakeside neighborhood on Feb. 23, 2026.
In Placer County, Sarah and Michael Prince have worked with the foster family agency Koinonia Family Services since 2016. After struggling with infertility for over a decade, the couple decided to attend the agency’s orientation.
“I came home buzzing,” said Sarah Prince. “My intuition said, ‘This is my home.’”
It took them two years to go through the agency’s certification process. Since then, the couple has taken in 13 foster children, four of whom they ended up adopting.
“I couldn’t have done it without a foster family agency,” said Sarah Prince. “It’s an extra layer of protection for you. They are your family. When the things fall, it’s the knowing that you have somebody to call. It’s consistency for these kids that haven’t had consistency because your foster family agency workers don’t change.”
Laura Richardson, a manager at Koinonia Family Services, said the statewide agency works with roughly 360 homes, 99 of which are not taking placements. On any given day, they serve around 200 youth in their foster family homes.
According to Richardson, the organization’s insurance increased by 242% — from $272,000 to $933,000 per year — since the Nonprofits Insurance Alliance of California stopped renewing their policy. It’s meant that they’ve had to rescind their licenses in three cities, transferring those families to other offices that are still operating.
Richardson said they’re trying to hold out for as long as they can for the state to come up with a solution. But as more and more agencies shutter, she worries that the homeless population will increase for youth.
“I worry about the safety net for these most vulnerable youth going away,” she said. “It’s going to stress other parts of the system. So the state is going to have to pay for it somewhere. My hope is that we can fix what’s good about what we already have before we lose it.”
Cayla Mihalovich is a California Local News fellow.