California FAIR Plan

The California FAIR Plan is an insurance solution for homeowners in high-risk areas of the state who are unable to secure fire coverage through the private market.

Contrary to popular belief, the FAIR Plan is not government-backed. Instead, it's financially supported by private insurance companies operating in California.

The plan has faced increasing strain due to market conditions, with a significant rise in policyholders — about 408,000 policies as of June 2024, marking a 164% increase since 2019. For those living in high-risk wildfire zones, the FAIR Plan may be their only option for financial protection.

How does FAIR Plan work?

The California FAIR Plan works as a last-resort insurance option for homeowners in high-risk areas, such as regions prone to wildfires, who can't get coverage from traditional insurers.

Here’s how it operates:

Basic Coverage

Basic FAIR Plan coverage only protects your dwelling and personal property against four specific perils: fire, lightning, internal explosions, and smoke. Liability coverage is not included, and the standard policy insures your home at actual cash value (ACV), which accounts for depreciation.

Purchase Process

Homeowners must apply through a licensed insurance agent or broker, who submits the application on their behalf. The FAIR Plan provides a quote based on the risk and property details.

Supplemental Coverage

FAIR Plan policies can be customized with additional endorsements to broaden coverage, but this increases the overall cost.

Available Endorsements:

Other Structures Coverage: Protects detached structures, like garages and sheds.
Fair Rental Value Coverage: Covers lost income from rental properties damaged by covered perils.
Dwelling Replacement Cost Coverage: Insures your home at replacement cost value (RCV) rather than ACV.
Personal Property Replacement Cost Coverage: Covers belongings at their replacement value without depreciation.
Ordinance/Law Coverage: Pays for code-compliant repairs after a covered loss.
Vandalism and Malicious Mischief: Adds protection for damage caused by vandalism.
Debris Removal Coverage: Pays for cleanup after a storm.
Inflation Guard Protection: Adjusts coverage limits automatically to account for inflation.
Plants, Shrubs, and Trees Coverage: Offers up to $250 for landscaping damage.
Outdoor Equipment, Awnings, and Signs Coverage: Covers damage to outdoor items, with exceptions for wind or hail storms.
Improvements, Alterations, and Additions Coverage: Covers condo improvements or alterations.

Homeowners can also purchase earthquake insurance separately through the California Earthquake Authority, as this coverage is not included in the FAIR Plan.

Since the FAIR Plan only offers basic protection, most homeowners will need to buy additional policies, called "Difference in Conditions" policies, to cover things like liability, water damage, or theft.

High-Risk Protection

It’s meant for those living in high-risk areas where traditional insurance companies won’t provide coverage, ensuring homeowners have some level of protection for their property.

The FAIR Plan helps homeowners in fire-prone or otherwise risky areas get essential insurance coverage when no other options are available.

How much does it cost?

FAIR Plan premiums are typically higher than standard homeowners insurance policies.

The cost depends on factors:

home’s location
age of the property
condition of the property
proximity to a fire station
homeowner’s claims history
coverage options
deductibles

In 2022, the average annual cost for a FAIR Plan policy was around $3,200, significantly higher than the $2,150 average for a typical homeowners policy covering $300,000 in dwelling protection.

Additionally, since the FAIR Plan offers more limited coverage, homeowners may need to purchase supplemental policies, such as a DIC or earthquake insurance, further increasing their total insurance costs.

Eligibility for California’s FAIR Plan

The FAIR Plan offers coverage for a range of properties, including owner-occupied homes, seasonal residences, condos, and rental properties.

To be eligible, a property must meet specific requirements, such as being located in California and satisfying building code criteria. The property must be a single-family home, townhome, condo, or rental unit.

Ineligible Properties

Vacant homes unoccupied for over half the year
Homes with unrepaired damage
Properties linked to illegal activities.

Homeowners must demonstrate that they have been denied coverage from private insurers before qualifying for the FAIR Plan. As the insurer of last resort, the FAIR Plan is meant to serve those with no other insurance options due to the high-risk nature of their property.

At George Park Insurance, we are licensed to help you apply for the California FAIR Plan.

This means if you're having trouble securing standard homeowners insurance due to living in high-risk areas, such as wildfire zones, we can assist you in getting the protection you need.

We can guide you through the application process, help you understand your coverage options, and even recommend additional policies to fully protect your home.

Reach out to us to explore how the FAIR Plan can work for you and keep your property safe.