Understanding California FAIR Plan Insurance

If you live in an area at high risk of wildfires, you may have a difficult time finding homeowners insurance. If that’s the case, you’ll need a California FAIR Plan.

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The California FAIR Plan is a program that provides basic home insurance coverage to high-risk residents who are unable to get covered by standard insurers. Homes in wildfire-prone areas and older residences in need of updates might be considered high-risk properties. If you have a history of frequent claims or a poor credit score, you may also be considered high risk by insurance companies.

One thing to keep in mind about California FAIR Plan insurance is that it only covers damage caused by fire, lightning, smoke, and internal explosions in the home, so you’re getting significantly less protection than you’d get with a standard homeowners insurance policy. Optional coverage for vandalism is also available for an additional cost. 

Key Takeaways

  • The California FAIR Plan is a type of last-resort homeowners insurance for California residents who can’t find coverage through traditional insurers

  • FAIR Plans cover damage caused by fire, lightning, smoke, and explosions. Losses from theft, wind damage, and liability are not covered  

  • These policies are generally paired with difference and conditions (DIC) insurance, a type of supplemental coverage that covers what your FAIR Plan doesn’t

  • On average, California FAIR Plan insurance costs more than homeowners insurance

How does the California FAIR Plan work?

Fair Access to Insurance Requirement (FAIR) Plans, also known as “shared market plans,” were established in many states to help homeowners who can’t find coverage through a regular insurance provider. It is technically considered an insurance “pool,” as every licensed insurance company in the state shares in FAIR Plan profits and contributes to paying out claims.

In California, FAIR Plans have become especially important as wildfires continue to devastate the state and insurance becomes more difficult to find. These policies should not be thought of as equal to homeowners insurance, but they are a temporary safety net that can buy you some time while you find better protection for your home. 

Who is eligible for the California FAIR Plan?

To get coverage with the CA FAIR Plan, you’ll need to contact an insurance broker who will attempt to find you coverage through a traditional insurer first. If there’s no takers, your broker may recommend this last-resort coverage.

Once you apply for a FAIR Plan, there may be additional eligibility requirements related to your home that you must meet. If the home is vacant or badly damaged and in need of repairs, for example, you’ll likely be denied coverage. But the average resident shouldn’t have a difficult time meeting the plan’s underwriting standards. 

California FAIR Plans don’t cover things like theft, windstorms or hail, or liability, so you’ll need to purchase additional insurance to keep your home adequately insured. Most California residents purchase what’s called a difference in conditions (DIC) policy to supplement their FAIR Plan. Your broker will probably be able to find you a suitable DIC policy. The California Department of Insurance also has a list of insurers that sell this complementary coverage. 

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What does the California FAIR Plan cover?

The California FAIR Plan covers damage to the structure of your home and personal property  caused by fire, smoke, lightning, or an explosion. If your home is damaged by any of those perils, you’ll need to file a claim to be paid out for repair or rebuild costs. 

When setting up your policy, you’ll have the option to choose between actual cash value and replacement cost coverage for the home itself and your belongings. Actual cash value coverage is less expensive, but property depreciation is factored into claim payouts. That means if your 5-year-old laptop is stolen from your home, five years of depreciation will be deducted from your claim payout. Replacement cost coverage comes at a higher premium, but depreciation is not calculated into your claim settlement.

As of this writing, the California FAIR Plan provides the following coverage to homeowners. Keep in mind that other than dwelling coverage, every one of these are optional add-ons.

CoverageWhat it covers
DwellingYour home and structures attached to it
Other structuresAdditional structures on your property, like a detached garage, shed, or guest house
Personal propertyPersonal belongings, including furniture, clothing, and electronics
Ordinance or lawAny mandatory structural upgrades that adhere to local building ordinances
Replacement cost (dwelling)Insures your home at its replacement cost, which doesn't include depreciation
Extended replacement cost (dwelling)If rebuild costs exceed your home's replacement cost coverage limit, this extends it an additional amount
Replacement cost (personal property)Insures your belongings at their replacement cost, which doesn't include depreciation
Debris removalDebris removal and property cleanup after a disaster
FencesDamage to fences on your property
Plants, trees, shrubsUp to $250 in coverage per damaged plant or tree
AwningsDamage to awnings attached to your home
Permitted incidental occupancyBusiness property
Outdoor radio and TV equipment and signsDamage to outdoor electronic equipment and signs

In the event of a claim, you’ll first need to pay your policy deductible, which is the amount that you pay out of pocket before your insurance kicks in. The CA FAIR Plan offers deductibles amounts that range from $250 to $20,000. A higher policy deductible will mean lower insurance premiums, but it also means you’ll have to pay out more after a loss, so be sure to choose an amount that you’ll be able to afford in the event of a disaster.

How much does the California FAIR Plan cost?

The average cost of homeowners insurance in California is $1,073 a year, according to the National Association of Insurance Commissioners. While FAIR Plans are generally more expensive than insurance on the voluntary market, your own policy cost will depend on factors like your ZIP code, the age and condition of your home, how much coverage is in your policy, and your deductible amount. 

How to get a California FAIR Plan

Once you’ve exhausted every option on the private insurance market, your best bet is to purchase California FAIR Plan insurance. Here is the best way to do that. 

  1. To apply, simply go to the California Fair Plan Property Insurance website and click through to its “Find a Broker” tool. From there, you type in your ZIP code and you’re matched with licensed agents in your area. 

  2. Before contacting a broker, be sure to have as much information on hand as possible, including declarations pages from prior policies or home appraisals that can inform your policy’s dwelling coverage limit. 

  3. That last step is important, because these plans don’t estimate your dwelling coverage on your behalf — it’s up to the policyholder to choose. 

  4. If you don’t have any up-to-date information about your home’s reconstruction cost, consider using a homeowners insurance calculator or hiring an appraiser that specializes in replacement cost estimates

  5. Once you’ve been approved for coverage, you’ll need to pay your first policy premium before your coverage will go into effect. Payment can be made through the CFP website or over the phone.

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